Google Considering Dutch Auction For IPO; Investment Bankers Crying

from the sorry-about-that... dept

New banking firms like WR Hambrecht have been pushing the idea of the "Dutch Auction IPO" where instead of having a bunch of greedy investment bankers setting the price of your IPO (and, of course, pricing it below the real market price to guarantee a first day pop that the press likes so much - even though it means lost money to the company) you let everyone and anyone bid on how much they want to pay, and then set the actual IPO price based on the highest price where all of your shares will sell out. For years, this option has been around, but most companies have been afraid to try it out, believing (perhaps correctly) that they needed big name investment bankers touting the stock to guarantee that it got enough attention from the financial community. Google, of course, doesn't have that problem. Everyone has been drooling over the concept of a Google IPO for ages, so they don't necessarily need the same support of a big time underwriter. So, it's no surprise to hear that they're at least considering the idea of a Dutch auction IPO sometime early next year. It does fit with Google's general nature, and could do wonders for those who believe in Dutch auctions as a much more equitable way of doing an IPO. Chances are it would make Google a lot more money, too, since it would cut their underwriting costs, and make sure that the deal wasn't underpriced - meaning Google gets the money that otherwise would have been thrown away to those flipping the stock on the first day. Still, the investment banks wooing Google probably are scared of this idea (they'll make less money, and won't be able to give their "friends" the favors they surely want) and will try to do whatever they can to convince them otherwise.
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  1. identicon
    Ann, 28 Dec 2003 @ 9:26am

    Google and an OpenIPO

    I disagree that the IPO auction method fits with Google's general nature. Google has succeeded by providing value to users, not by screwing the little guy whenever possible. The only advantage an auction would have is that Google might be able to set off a stampede that would price the shares far above a sustainable level (as with Singapore Telecom, East Japan Railway and of course Argentina Telecom, among others). Google would raise more money at the expense of investors, who would lose out when the stock fell back to a reasonable price. Google's philosophy has never been "take the money and run" - why should they start now?

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