Today, Google announced some important figures regarding their upcoming IPO. They will be offering a total of 24.6 million shares, 14.1 million from the company and 10.5 million from current stockholders, for something between $108 and $135 per share in a Dutch Auction Process that is intended to maximize money the company gets should the stock price rise substantially during the IPO process. These shares represent 9% of the outstanding shares — meaning insiders and the company itself will still control over 90% of the shares. The company expects to pocket $1.66 Billion and have a $36 Billion market capitalization, making it an instant large cap stock, bigger than Dow component McDonalds. Nevertheless, this is not the biggest IPO ever. And at least now we have some income and revenue figures for the company: revenue of $1.4 Billion for the first half of the 2004 ($560 Million for first half of 2003); income of $143 Million for those 6 months ($58 million last year). That works out to 54 cents per share. If we say, for the sake of argument, that they might have earned a dollar per share over the last year (just short of 2 times 54), that still makes a rather rich triple digit multiple. Ticker symbol will be GOOG (4 letters because it’s listing on the NASDAQ).
You know what’s missing from this impressive mass of information? We still don’t know what Google needs with an IPO! Google is able to give us SEC documents with single sentences 594 words long, but all they are willing to say about where the money is going is it’s for “for general corporate purposes.”
If the proposed offering price is not sufficient to discourage you from calling your broker and learning more about how Dutch Auctions work, let me offer some more information. Despite Google’s publicly stated goal of making this an IPO that average people can participate in, the odds of you getting any of those shares at the initial distribution is low. Chances are you will not be able to buy any shares until they are available in the open market, and that means you won’t be paying $108 or $135 per share, but whatever the market says — it might be less, it will probably be more. The next important thing to remember is that the purpose of the Dutch Auction process is to insure that any insane bid-up process benefits the company, not some speculative institutional investor. In short, the company doesn’t want to make investors wealthy, they want to make the company wealthy. And finally, you need to be aware of something called a lock-up period. About 6 months after the IPO, not only will insiders be free to dump massive amounts of stock for incredible profit, it will become possible for short-selling to occur. Both these things have the potential to bring down the stock price.
Issues with the stock offering itself aside, you also need to know about some looming legal issues. There’s a big age discrimination suit filed against the company, with millions of dollars in real damages. And based on information revealed so far, this case isn’t going away cheaply.
But if you have $13,500 — what 100 shares of GOOG at the IPO price is likely to cost — burning a hole in your pocket, why not consider 150 shares of IBM, which will also pay you a $0.72 per share quarterly dividend. You could buy 145 shares of United Technologies, and get $1.40 per share each quarter. That money would also buy 465 shares of Microsoft, which announced a $3 per share special dividend last week. Or 425 shares of Apple, which doesn’t get you a dividend, but is in an up-trend (disclaimer, I own shares). Or if you’d prefer something more diversified, there’s iShares, sort of like mutual funds that trade like stocks (disclaimer, I own shares in one of them).
If you prefer to put your money in the karmic bank, there are lots of ways to spend $13,500 towards the good of others. Around your community there are probably charities that could use some money. Look around you.