IPO's Success Doesn't Justify Google's Price
One of the tongue-in-cheek rules that we column-writers have is, "Often wrong, never in doubt." Take a stand, don't duck and weave too much. But someone as opinionated as I am should not only have no doubt, but shouldn't be wrong too often. No one's perfect, though. As witness the column I wrote three weeks ago as I headed for vacation, warning you not to buy Google at its initial public offering price.</br></br>Oh, well. I'm back from the beach and it's clear that my advice turned out to be wrong. If you disregarded my opinion and bought Google at its $85 IPO price, you're sitting pretty, given that the stock has never traded below $95 and closed Monday at $109.40. Heck, if I'd known that was going to happen, I'd have hocked myself to the eyeballs, bought the IPO, taken a quick $20-a-share profit and used it to buy a beach house that I'd have named Never In Doubt.</br></br>Of course, at the time I wrote that column, Google's projected price range was $108 to $135 a share, the offering was set at 24.6 million shares and the company said it would use a Dutch auction to price the IPO. Such an auction lets potential buyers say what they're willing to pay and sets the price at the point where there are enough buyers to buy all the shares being offered. That's designed to make sure that sellers aren't settling for a way-below- market price and IPO buyers aren't getting a windfall.</br></br>But everything changed while I was recreating. Google cut its price to $85, trimmed 5 million shares from the offering and -- most important -- seems to have set the price artificially low to ensure a quick run-up. Instead of a true Dutch auction, which would probably have produced an IPO price of $95 to $100, Google sold at $85 and gave successful bidders only about 74 percent of the shares they sought. This created pent-up demand -- clearly what started the price running.</br></br>Sorry to have been wrong -- but that's what happens when I depart from my customary skepticism and trust people I don't know. I thought the guys running Google were serious about not wanting to manipulate their stock price. Oops. As they say in pro sports, my bad.