Wall Street's Google FUD
from the how-it-all-works dept
Before Google officially announced their IPO and it was only rumored that they would do an auction style IPO, we noted that the banks would flip out about this, and do whatever they could to stop it. Ever since the rumors first came out, Wall Street has cranked up the PR buzz to suggest that Dutch auction IPOs are bad news. Then, once Google finally did announce their plans to go public, even the banks taking part have started complaining about it and suggesting that people not invest in the IPO. Anyone who knows anything about Wall Street knew this would happen. Unfortunately, plenty of people don’t know anything about Wall Street, and still aren’t skeptical despite the years of bad advice people have received from bankers. So, it’s good that at least someone has written a piece detailing what we’ve been saying for a while (and thanks to the anonymous submitter who point this out to us): Wall Street is doing everything possible to make Google look bad so no other uppity company gets the idea to actually price their shares at a market price, rather than leaving a big pile of money on the table for the bankers and their friends. Now, it is true that the auction process has its problems as well. It’s not the perfect solution. However, it certainly sounds better than selling shares to an underwriter at $10 who passes it on to their friends to flip that same day at $90, as happened during the boom years. Investment bankers purposely underprice shares, which is bad for the company selling shares. The auction may tend to overprice shares (which could be bad for investors buying into it), but it doesn’t leave money on the table for the company going public.