Google is teetering on an IPO.
I am not investor savvy, but it seems like Google is the real deal.
In the spirit of discussion, how does one take advantage of an IPO from such a lucrative company? Buy in the morning, sell in the afternoon? Buy and sell once they take over Microsoft?
define what you mean by “most”? If you like google, think it’s the greatest thing since sliced bread, will eventually gobble up Microsoft on the way to global domination, then you should buy it at any price you can get your hands on it and never sell.
The simplistic but factual answer is buy low, sell high. Answering the question beyond that is probably a matter for the IMHO forum.
It is very hard for the average person to profit from an IPO. The institutional investors get all the breaks.
Also, by the time Google goes to IPO, the market will probably have valued it pretty well. The heady days of the insane IPOs of the 90’s are long gone.
And I don’t share your view that Google is going to do great. It’s certainly the best search engine now, but things change awfully fast on the internet. I’d consider it a very high risk stock.
Let me try to refrase for the General Questions area:
What are the financial benefits, if any on getting in on an IPO? With all of the media hype on the Google IPO, there must be some reason as to why.
I’m trying not to opinionate this becuase I’m looking for an actual right answer if there is one.
Also, what are the share value trends with IPO’s?
In most (not all) cases, the company and its underwriters intentionally underprice a stock by at least a bit to create aftermarket demand. So if you can get IPO shares directly, as institutions and favored retail customers do and you, basically, don’t, you have an extremely low-risk short term investment – get it in the morning, sell it on the break or later in the day or even a few days later.
OK, so that’s the short term. The truth is that in the long term, most IPOs end up trading below the initial offer price some time within the next couple years. So why do people buy them? Well, hope over experience for one thing. For another, that one that takes off and never looks back can make up for more than a few dogs. But mostly hope over experience.
Ugh. As broadly as that question is stated, there isn’t one. Basically, the underwriters look at “comperable” stocks and try to price the new stock at a discount or premium to its comps depending on the market, the quality of the company, etc. Let’s say we wanted to take Almagamated Steel public. We’d look at all the steel comapanies which are public and how they’re valued and go from there. Maybe Amalgamated is bigger than anyone else. More profitable? In a better product line (say, stainless steel?). Well, you put all that in a book and go on the road to visit the big institutions and tell your story. Then the underwriters gauge interest from those investors and set the price.
Google will be different, as were most of the dot-gones. I can’t tell you different how yet, because they haven’t filed for their offering. But it’ll be different simply because it’s so anticipated.
Bottom line – how can you profit from Google’s IPO? I don’t know, but you probably can’t. Because if you can get shares, there’s a reason.
Sorry. 
Thanks manhattan. Most helpful, you got right at what I was asking for. Thanks!
De nada.
They’ve sinced filed financials and some details about how they’re intending to go public.
The most interesting thing is that they intend to do it through what’s known as a “modified Dutch auction.” What the heck is that? Well, most IPOs price as I described – the underwriter “guesses” (it’s more complex than that, of course) at the clearing price and assigns a discount to stimulate aftermarket demand.
In a Dutch auction, everyone looks at the financials, learns what then can and then they “bid” for the stock. Basically, they assign what they’re willing to pay and submit the bid to the underwriter. The highest bids get filled first, and everyone gets filled at the highest price which will get all the shares sold. So say you think it’s worth X per share and bid that. With all their accumulated bids, the underwriters can sell all the shares they intend to at X - 10%. Lucky you – you get all the stock you asked for and you get it 10% cheaper than you were willing to pay. The guys who bid X - 10% split what’s left after the higher orders were filled. The guy who bid X - 11% is SOL.
This is pretty similar to how the Treasury auctions its debt, and it’s a darn good, efficient system in most cases.
A twist here is that the number of shares Google is willing to sell appears highly variable – they’ll sell more at high prices and less at low prices by prevailing on some of their large investors and employee shareholders to put a sell price on their shares. Which will make the underwriters work for their money – things get very, very complex when both demand and supply are highly variable and price sensitive. It’ll also make some poor SEC examiner very unhappy – his job will be to monitor the process for abuses, and while Google seems like a pretty stand-up company, tracking something like that in an auction like this is tricky. Example: What if Google is pumping demand so the big guys can get out and leave the little guys holding the overvalued bag?
What does it all mean? I have to withdraw my prior answer of “you can’t” and substitute a big honkin’ “I dunno.” It’s gonna be a very interesting process.
I will say that the values being talked about are very, very high. Like, 200 times LTM earnings high. Google will have to grow at a pretty good clip for a long time to justify that price. On the other hand, they have been. I’d say a potential investor would have to weigh just how long that growth can continue – Google is constantly rolling innovative new products and doing a good job of matching advertisers with people who want to see the ads as opposed to those annoyed by them, but there’s only so much advertising revenue in the world and how much can Google capture/grow the market?
Again, I dunno.