Google IPO Investors Get A Break

It wasn’t pretty to watch, but the long-awaited initial public offering from Google got one thing right: investors who braved all the negative publicity to buy at the IPO price saw a nice gain for their efforts.

Google jumped 18% from its IPO price of $85 to close at $100.34 in its first day of trading, 33 cents above where it opened for trading on the Nasdaq stock market. The stock spent its first day trading between $95 and $104.06. Google ended the day with a $27 billion market cap, below the $29-$36 billion market cap the company was initially hoping for.

The company and its shareholders raised $1.67 billion in the offering by selling 19.6 million shares. Turnover was brisk on the first day of trading, with more than 22 million shares changing hands.

There was some evidence that the company may have set a lower price than the auction would have supported in order to give the stock some support as it began trading, as there were reports of winning bids that were not completely filled.

Google’s successful debut capped months of intense scrutiny and controversy about the company and its unusual Dutch-style auction. An ill-timed interview granted to Playboy magazine and millions of shares that the company failed to register with the SEC raised questions about the company’s judgment and experience. And the auction itself was the subject of controversy. Institutional and individual investors questioned the company’s valuation and plans for the money, forcing Google to reduce the terms of its offering, and Wall Street rooted against the IPO because the process meant lower underwriting fees. And even though the process was meant to be democratic, some underwriters reportedly placed restrictions on who was qualified to bid.

Despite the rough road, in the end, the company made it across the finish line.

And now that the process is over, the company must execute and prove itself to Wall Street. Even after today’s 18% pop, Google trades at 77 times 2004 earnings estimates and 42 times 2005 estimates, below rival Yahoo’s valuation of 83 times 2004 estimates and 60 times 2005 estimates, despite Google’s higher growth rate. Analysts say investors may have taken a premium out of Google’s stock because of its missteps in the IPO process.

Longer-term, the stock faces potential pressure from some 263 million shares that will become eligible to be sold by insiders within six months. At 13 times the number of shares currently trading, that share overhang could weigh on the stock.

For both the company and its investors, the easy part may be over.

Stocks fell Thursday as oil prices surged to new highs on tensions in Iraq. Weaker than expected economic reports also weighed on the market.

The Nasdaq lost 11 to 1819, the S&P 500 fell 4 to 1091, and the Dow lost 42 to 10,040. Volume declined to 1.26 billion shares on the NYSE, and 1.42 billion on the Nasdaq. Decliners led 18-14 on the NYSE, and 18-12 on the Nasdaq. Downside volume was 57% on the NYSE, and 64% on the Nasdaq. New highs-new lows were 61-14 on the NYSE, and 38-51 on the Nasdaq.

After the close, AutoDesk beat estimates, and Novell met estimates.

During the day, Nortel rose 4% after finally releasing results and announcing a restructuring.

Amazon slipped 2% on a move into China.

Texas Instruments edged higher after Qualcomm halted a suit against the company.

Synopsis plunged 31% on a warning.

Intuit , Ciena , Rediff and Provide rose on their results, while Brocade and C-Cor fell on their numbers.

And in a reminder that the IPO market remains tough, Lindows withdrew its IPO.

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