With traders’ eyes locked on their computer screens, fingers twitching as
they awaited the GOOG ticker to move, Google floated into the public markets
Thursday at $85 and immediately jumped to $100 on the Nasdaq stock market.
As investors moved to get a piece of the oft-delayed, but apparently still-hot IPO,
shares of Google
had settled in at about $98 just
after noon eastern Thursday, up by about 15 percent from its debut offer.
At that price, which was trending higher at presstime, Google and its shareholders had raised just under $2 billion. But at $85, the company raised $1.67 billion.
The debut followed weeks of missteps, gaffes and even some investor
confusion about its unique Dutch auction style — a process that managed to
ruffle the feathers of institutional investors and some Wall Street
brokerages for how it was handled.
Institutional and retail investors were rumored to be lukewarm on the
offering because of the high valuation, rumors that were confirmed by
Tuesday’s reduction in the size and price of the offering from its earlier
range of $108 to $135.
But Kevin Lee, the CEO of search engine Did-It, a U.S.
search engine marketing firm, said he expected more interest after the
shares began trading. Lee, who bid to buy 200 shares
during the Dutch auction process and was awarded about 140 shares from his
tiered bids on the stock, said he was waiting to see how the issue fared before
deciding what to do.
“There may be a whole lot of pent-up demand, people who thought $108 was
too high, or who felt the [underwriters] set too high a threshold in terms
of investing experience or net worth” in order to participate in the IPO,
he told internetnews.com. “I spoke to a lot of people who wanted to
wait and see.”
At press time, shares of Google had gone as high as $149.93, a 76 percent
jump from its initial price of $85, before settling back around $98. However, a Nasdaq spokesman told CBS Marketwatch that a broker-dealer put up premature data. The $149 trade is expected to be canceled.
Google’s road to its IPO had been bumpy, such as an ill-timed
interview granted to Playboy magazine and millions of shares that the
company failed to register with the SEC. IPO ambitions are frequently
reduced in lackluster markets, but Google’s reduction was above average.
The selling mood in the markets as of late didn’t help either. Google eventually slashed its anticipated price range for the IPO, and shareholders reduced the number of shares they sold in the
Chris Winfield, the president and co-founder of 10E20, a
global search engine marketing firm, said he was sitting out the IPO.
“I still don’t think the price is justified. From my perspective, I love
Google, but I see too much competition from Microsoft’s
MSN and Yahoo
to really think they’ll be able to sustain
the same level, even market share, they have.”
Yahoo trades at 83 times 2004 earnings estimates and 60 times 2005
estimates. Using the estimates of Mark Mahaney of American Technology
Research, at $85 a share, Google will trade at 65 times 2004 estimates and
just 36 times 2005 estimates.
For the six months ended June 30, Google’s profit was $143 million, on revenues in the same period of $1.35 billion, according to its SEC filings.
The real measure of GOOG will come in the next few weeks, as Googlemania gives way to business as usual on the Street. That’s when the market will make clear the true value of the stock.
“It will be a volatile stock,” said Tom Taulli, author of Investing in IPOs. First, hedge funds and short-sellers will have their way with it, selling it off to bargain hunters who eschewed the auction. “If you’re a retail investor playing with professionals,” Taulli said, “you’ll get crushed.”
Susan Kuchinskas contributed to this story