I’m fascinated by the upcoming Google IPO. For a few reasons
1) It’s been a long time since there was a potentially explosive IPO to watch. The first that I remember was Netscape in, I think, August 1995 or so – followed soon after by Amazon. Those two ignited the Nasdaq for 5 years or so. This one, Google I mean, seems to have had the opposite effect – so far, since it was announced at the end of April, the Nasdaq is down about 100 points (which my poor maths says is close to 5%). Is this leading us into a new downturn in the market or will it, once it arrives, reignite the market?
2) Google makes 95% of its money (today) from advertising. The ads are posted next to the search results as everyone knows – which is better than merging them with the main results as some other sites do. But Google only gets paid when people click on the ads. Gaming that system when only google gets money isn’t much fun. But now that a lot of people are about to become share holders, how long will it be before a few clever script writers do their thing and write something that searches for dictionary words and clicks on a link (and maybe even follows a couple of pages deep)? Google gets more money, the stock price goes up. The shareholders are happy. The only people who aren’t smiling are the advertisers who pay more money for nothing. Who wants to bet that a future generation of viruses will take over your PC with a view to running scripts to drive up traffic on google?
3) The auction thing is novel and interesting. We’ve seen auctions before with the 3G spectrum. HM Treasury and some of their European neighbours think it was great, the phone companies have mostly taken some write-offs and the phone buying public have largely ignored it since it happened. This is different – this is eBay for stocks. I don’t know whether such an auction will work on this scale. It seems to me though that more people will try and buy more stock than is actually available and so the price will be to the top end of the selected range. Others are then going to come in once the stock is trading and buy their share and push the stock up. That means there’s a pop on the open. Maybe not a pop like the old days – who remembers Geocities and it’s 500 or 600% one day gain? But a pop nonetheless. I’d bet on 50% maybe a bit more.