Wednesday, August 18, 2004
IPO Not Working Out For Google
Google's mega-hyped Initial Public Offering does not seem to be working out as planned. Early Wednesday morning came the announcement that the search engine giant was cutting share prices and the number of shares. Analysts suggest that they hype never translated into the results Google wanted wanted, and the complicated Dutch auction structure may have confused buyers. The price range of shares has been lowered from the original prediction of $108-$135 a share down to $85-$95 per.
Google will now be worth $10.8 billion less, from $36.6 billion down to $25.8 billion. Google founders Sergey Brin and Larry Page may each lose about two billion in the new deal. CNN reported that they, as well as CEO Eric Schmidt, cut the number of shares they are selling in half, obviously dissapointed with the way things are going. Also, only 5.5 million shares will be available, instead of 11.6 million. The company will still sell 14.1 million shares on its own, as originally planned, bringing the total number of shares 19.6 million.
However, this may be good for investors. Google's stock price is almost guaranteed to rise after it goes public, and is likely to stay high for the foreseeable future. Originally, Google was priced so high that it would take several years before it became worth as much as its stock, making the stock a good buy. Now Google is under-valued, almost cheap, and could reach the value of its stock in only a year. Google is now valued a 25% discount over competitor Yahoo, despite being more financially stable than that company. Short-term this may seem like bad news, but long-term we will see a more profitable, safer Google.
Google has asked the SEC to declare its registration valid at 4 p.m. today, meaning trading of shares, the biggest test the young company will see, is almost upon us.