GOOGLE TRUMPS
Google has trumped Wall Street wizards from beginning to end in its initial public offering. Investment banks were agitated from start when, instead of soliciting their services to promote and sell the public issue, the company opted for “Dutch auction” for its IPO.
Google did not want the bankers to manipulate its issue and limit the offering to their clients for subscribing in bulk quantity. It wanted to afford for common people opportunity to invest and to itself the chance to sell the shares at fair value.
It even discarded such big names as Goldman Sachs and Merrill Lynch to enlist as lead managers and limited it to only the two, Morgan Stanley and Credit Suisse First Boston. It also placed the issue price in $108-$135 range it thought merited its offering.
Clearly Google was at odds with investment banks who took to arms, so to say, to play down Google.
They spread the word the issue would not draw enough subscription. Further that August was a bad month for the market and hence for IPOs. And still furthermore that common investors would burn their fingers subscribing at indicated price range, as the shares were to attract selling on listing and sure to bust.
Meanwhile, on June 21, 2004, barely two months after the company filed to the Securities and Exchange Commission on April 29, Merrill Lynch had pulled out of the IPO as underwriter declaring the low fees Google was offering would not cover heavy technology investment on its part.
Wall Street’s well-founded interests were virtually challenging Google in going public on its own terms.
But Google confounded these interests on the SEC approving its IPO on August 18. It lowered the issue’s price range to $85-$95. It also cut the issue size at the same time.
These moves had their implications to Google and its founders as well as its financiers, the venture capitalists, in addition to existing shareholders. The last mentioned cut down the number of shares they were to sell from 11.6 million shares to 5.5 million shares. Co-founders Sergey Brin and Larry also reduced their offering. Both the venture capitalists, Kleiner Perkins Caufield and Byers and Sequoia Capital, withheld their proposed offerings altogether.
With lowered price-range Google’s potential value has fallen by more than $10 billion to $25.8 billion. The money raised in the IPO is to amount to barely half the figure of $3.5 billion that would have been raised at the top of the proposed price-range.
Yet, when Google backtracked on offer price, it appeared to have done so, not because of apprehensions of success of its IPO, but to checkmate Wall Street’s bankers in any move to dump the shares.
Listed on NASDAQ, on Thursday, day one of trading, Google shares recorded the low of $95 and the high of $104.06, and on Friday, day two, closed at $106.87, gaining 27 per cent since debut.
Interestingly, now analysts have taken the place of bankers, rating the shares from “hold” and “moderate” to “buy”.
Coincidentally, on Monday (August 23), Google shares closed at $109.40.
Google did not want the bankers to manipulate its issue and limit the offering to their clients for subscribing in bulk quantity. It wanted to afford for common people opportunity to invest and to itself the chance to sell the shares at fair value.
It even discarded such big names as Goldman Sachs and Merrill Lynch to enlist as lead managers and limited it to only the two, Morgan Stanley and Credit Suisse First Boston. It also placed the issue price in $108-$135 range it thought merited its offering.
Clearly Google was at odds with investment banks who took to arms, so to say, to play down Google.
They spread the word the issue would not draw enough subscription. Further that August was a bad month for the market and hence for IPOs. And still furthermore that common investors would burn their fingers subscribing at indicated price range, as the shares were to attract selling on listing and sure to bust.
Meanwhile, on June 21, 2004, barely two months after the company filed to the Securities and Exchange Commission on April 29, Merrill Lynch had pulled out of the IPO as underwriter declaring the low fees Google was offering would not cover heavy technology investment on its part.
Wall Street’s well-founded interests were virtually challenging Google in going public on its own terms.
But Google confounded these interests on the SEC approving its IPO on August 18. It lowered the issue’s price range to $85-$95. It also cut the issue size at the same time.
These moves had their implications to Google and its founders as well as its financiers, the venture capitalists, in addition to existing shareholders. The last mentioned cut down the number of shares they were to sell from 11.6 million shares to 5.5 million shares. Co-founders Sergey Brin and Larry also reduced their offering. Both the venture capitalists, Kleiner Perkins Caufield and Byers and Sequoia Capital, withheld their proposed offerings altogether.
With lowered price-range Google’s potential value has fallen by more than $10 billion to $25.8 billion. The money raised in the IPO is to amount to barely half the figure of $3.5 billion that would have been raised at the top of the proposed price-range.
Yet, when Google backtracked on offer price, it appeared to have done so, not because of apprehensions of success of its IPO, but to checkmate Wall Street’s bankers in any move to dump the shares.
Listed on NASDAQ, on Thursday, day one of trading, Google shares recorded the low of $95 and the high of $104.06, and on Friday, day two, closed at $106.87, gaining 27 per cent since debut.
Interestingly, now analysts have taken the place of bankers, rating the shares from “hold” and “moderate” to “buy”.
Coincidentally, on Monday (August 23), Google shares closed at $109.40.
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