OK – well its been about a month now since I made my prediction about Google…
My bet was that Google would not sustain a $100 price within a week of the IPO. On the technicality, I guess I was right – the auction went for $85. But, overall, I confess I was wrong. Its stayed above $100 since the opening bell, and now hovers at $113. Congrats to them!
Some of the traditional investment “experts” are still criticizing Google for having “flubbed” their IPO. While you may think I’d agree with them based on my previous blog on the subject, I absolutely do not.
What I do agree with is that they made the process too intimidating and scared off investors.
But I do not conclude that they did the wrong thing or flubbed. They absolutely did the right thing.
The Forbes article claims that “Google left money on the table” (as opposed to had they not used a dutch auction), and therefore they flubbed the whole IPO. But the real question is “who didn’t get their money”? If Google had used a traditional IPO, they would have received a fixed, negotiated price from their underwriter – which they would have been locked just a few hours before the IPO. As I mentioned before, Netscape negotiated $24 per share on their IPO. However, the shares immediately turned around for about $70 on the open market. Did they leave money on the table? Oh yeah – about 2/3rds of the money!
Had Google trusted the traditional investors, the same thing likely would have happened. Google may have seen as little $50 or $60 per share (far less than what they did retain for the shareholders), and the opening bell price would have been the same.
So, who didn’t get their money? The “traditionalists” didn’t. And they feel upset about it. Its just a case of sour grapes.