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Google IPO: Too Clever by Half

Posted By Barry Ritholtz On August 18, 2004 @ 5:37 am In Finance,Web/Tech | Comments Disabled


At approximately 3am this morning, Google slashed its IPO price range [1] and cut the number of shares in its offering. The new expected range is $85 to $95 per share — down from $108 to $135. Google now says it expects to sell 14.14 million shares in the offering, down from 20.15 million shares, as drop of 6.1 million.

While it would be easy to blame the Nasdaq’s woes for this change, that would be somewhat disingenous. Put simply, Google has been too clever by half. Their convoluted share structure, their attempt at reinventing the IPO wheel, their disdain for the capital markets — all exhibited a touch of hubris. The players in this space have been enjoying a bit of schadenfreude at Google’s expense.

Too clever by half, includes 1) their share price (50% too high) and 2) the number of shares offerred (also 50% too high).

The good news is that this creates some potential upside for buyers — at least based upon the original valuation of $108 – $135 or so.

I had previously noted [2] that “while Google may have rewritten the rules for Search, they may find the algorthms of the Street far less controllable than mere software code.”

Its true: Ones and zeros turn out to be a lot more malleable than bankers and traders . . .

click for larger chart
google_revs [3]
Graphic courtesy NYT [4]

Update: 8/18/04 6:45am
What does too clever by half mean? 150% of $85 is $127.50; 150% of 14.14m shares is 21.2m shares . . . ballpark numbers of what the original price and range loked like.

Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2004/08/google-ipo-too-clever-by-half/

URLs in this post:

[1] IPO price range: https://www.ipo.google.com/

[2] previously noted: http://bigpicture.typepad.com/comments/2004/07/google_prices_s.html

[3] Image: http://bigpicture.typepad.com/comments/images/google_revs.html

[4] NYT: http://www.nytimes.com/2004/08/18/technology/18future.html?ex=1250481600&en=657fa9275050582a&ei=5090&partner=rssuserland

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