The Story Behind The Story Of The Google IPO?

from the that's-an-awful-lot-of-insider-selling... dept

This morning, it seems like the big Wall Street tech story is the official release from Google about what they think they'll raise from their IPO. Looking over all the different coverage, it appears that many (especially in the financial press) seem to be getting the story a little mixed up. The basic facts seem to be that approximately 24.6 million shares will be put on the market with a range of $108 to $135 per share. As noted in the story, some seem to think that breaking $100 may prove to be a psychological barrier for many retail investors, even if the actual price per share is meaningless. Still, if the price is a psychological barrier, rather than a calculated decision, the investor probably shouldn't be buying anyway. A minimum bid from anyone must be for five shares, so anyone who wants in is spending over $500. The range is higher than expected, and could lead to a valuation pushing $40 billion. One analyst makes the bizarre statement that: "The question is not what the company is worth, but instead what people will pay for it," which misses the fairly simple, but important, point that the price people are willing to pay for the stock is what the company is worth. Meanwhile, many news articles are claiming that Google will raise $3.3 billion in the offering, which is not true at all (or at least, extremely unlikely). The details show that Google is likely to bring in about $1.66 billion (and possibly as high as $1.9 billion at the top of the range). That's because only 14.1 million of the 24.6 million shares are actually being sold by the company. The other 10.5 million are being sold by insiders. Now, that's a curious point that no one seems to be focusing on. While insiders do sometimes sell during an IPO, it generally doesn't look too good. While there are plenty of reasons (liquidity, liquidity, liquidity) that people might want to sell, usually insiders get locked up for a bit. It does happen, but in this case, an awful lot of that $3.3 billion (or whatever the amount actually is) isn't going to the company, but to others. The initial IPO filing tried to spin all this insider selling as a good thing, but that's pretty questionable. If people really believe in the stock, why are so many selling it at the very first chance they get? Doesn't inspire the most confidence in the world.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Gary Potter, Jul 26th, 2004 @ 9:07am

    Google's Down

    Might be coincidence but as of this moment, the venerable Google is down.

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    No One, Jul 26th, 2004 @ 11:15am

    Selling doesn't represent lack of confidence

    Virtual any investment advisor would advise someone with a large wealth in a single stock position to diversify their position. Plus, the amount (by percentage) that they will be able to sell is still small, so they will still have a more significant investment in Google then anyone else.

     

    reply to this | link to this | view in thread ]

  3.  
    icon
    Mike (profile), Jul 26th, 2004 @ 11:23am

    Re: Selling doesn't represent lack of confidence

    Indeed. I'm not criticizing the overall act of insider selling. It does happen all the time, and diversifying your portfolio makes plenty of sense (as I stated in the original). However it is rare that so much of an IPO involves insider selling. Usually, people wait a bit. I'm not saying that it definitely shows lack of confidence, but it is an awful lot of stock moving out at the first possible opportunity. That's questionable.

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Anonymous Coward, Jul 26th, 2004 @ 12:38pm

    vc and investors need to ipo to cash out

    inside investors selling their shares is normal. Its probably the first chance they've had to get any money back out of their initial investment in google.

     

    reply to this | link to this | view in thread ]

  5.  
    icon
    Mike (profile), Jul 26th, 2004 @ 12:50pm

    Re: vc and investors need to ipo to cash out

    Yes. Again, it is normal for insiders to sell... at some point. NOT DURING THE IPO. Not this much, anyway.

     

    reply to this | link to this | view in thread ]

  6.  
    identicon
    Anonymous Coward, Jul 26th, 2004 @ 1:31pm

    Re: vc and investors need to ipo to cash out

    How many issues shares are there to begin with?

     

    reply to this | link to this | view in thread ]

  7.  
    identicon
    spoogle, Jul 26th, 2004 @ 11:23pm

    Will people never learn?

    Google is not worth a plastic spoon and a soiled copy of National Geographic.

     

    reply to this | link to this | view in thread ]

  8.  
    identicon
    Anonymous Coward, Jul 27th, 2004 @ 10:49am

    Re: vc and investors need to ipo to cash out

    Selling in the ipo instead of after the ipo should make the price more stable. Which would you prefer?.

     

    reply to this | link to this | view in thread ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This