Investing Dopers, Your Views on Google's IPO?

In My Humble Opinion
1

Just my 2 pence, but I wouldn’t touch this with the proverbial bargepole. It’s a classic “jam tomorrow” stock, as Britons would call it.

Firstly, it doesn’t meet my own investment criteria, as I’m building a high-yield portfolio and page 31 of the IPO registration statement filed to the SEC by Google notes that the company has never paid a dividend and has no plans to do so. Sorry, but I need something in return for taking on the risk of holding a stock in the first place, and I prefer to take that compensation in the form of a nice, fat dividend yield.

Secondly, I am no fan of two-tier shareholder structures such as the one Google is planning to set up. (The company will sell two types of stock, Class A and Class B. The Class B stock, to be held only by Google managers, will have 10 times the voting rights of the Class A stock.)

I understand that the company’s founders intend this as a way of insulating themselves from Wall Street’s preoccupation with quarterly earnings. I agree with their viewpoint and feel that it would be perfectly adequate for U.S. companies to follow the British practice of publishing full results at the half-year and end-of-year stages and otherwise issuing periodic brief updates on their business. However, the reality is that U.S. companies do report on a quarterly basis, and while it’s admirable that Google wants to do something about that, IMHO the company’s founders could have found a better starting point than a blatantly discriminatory ownership structure.

Finally, while I am aware that Google is a profitable business, technology is an area with low barriers to entry. (That is, it’s not very hard for would-be competitors to start new search engines in an attempt to eat Google’s lunch.) As the company notes in the 20 pages of risk factors in its SEC registration, it faces “significant competition” from Microsoft and Yahoo, who will not be standing idly by while Google takes over the world, to say the least. And the low entry barriers in technology mean Google’s eventual nemesis could be a company that doesn’t even exist yet. Remember, Altavista (who dat?) was once flavor of the month too.

All the above is, of course, just MHO, but with the Federal Reserve clearly signaling (in my view) that the next move in U.S. interest rates will be upward, I’d say this is no time to be buying non-dividend-paying stocks of businesses that already acknowledge significant competition in an industry where it’s not very hard for new rivals to enter the fray. YMMV.

2

This is why I will not partake of the Google Stock. There are much more lucrative high yeild stocks out there. Sorry Google, your just not good enough. :slight_smile: I’ll put my Cisco - Pfizer - midwest factories stocks against a search engine any day of the week…With the market as sluggish as it has been for the last year…I’ll stay with the heavy hitters.

3

You know, I was actually toying with the idea of buying a teensy bit of Google stock, but you both have convinced me there are better investment avenues for my money.

I hadn’t gone so far yet as to get my hands on the prospectus, but if they aren’t planning on ever paying dividends, I’m not sure exactly what the point would be. Couple that with the tenuous nature of tech stocks… I’m out!

Thanks!

4

I’m not sure about whether I want to put any money into Google stock. I’m a poor student but have a little bit of money in shares (on the Stockholm exchange, because I’m from Sweden and know that market best). I don’t care at all about dividend payouts because I never own enough shares for it to be worth anything to me anyway. Also, I’ve stopped worrying too much about real numbers in company reports as I believe that the stock market works on a completely psychological basis. On this ground, I think that Google will become a high-flyer and will be way over-valued. This, however, doesn’t matter at all as I wouldn’t be keeping the shares as a long term investment, but rather a short term investment that will most likely beat index. Right now, however, my money is in Millicom (again, on the Sthlm exchange, although it’s main listing is on Nasdaq). Anyway, we’ll see, I might move my money to Google for a few weeks and see how that works out.

5

Good luck - from page 25 of Google’s SEC registration statement: “We have not undertaken any efforts to qualify this offering for offers to individual investors in any jurisdiction outside the U.S. Therefore, individual investors located outside the U.S. should not expect to be eligible to participate in this offering.”

Cheers, Sergey, Larry and Eric, nice one!

6

Once its floating on Nasdaq, I’ll be able to buy shares in Google. Not really a problem. Otherwise, if I desperately wanted to partake in the initial offering, I would ask my sister (a U.S. resident) to help me out.

7

It will be interesting to watch even if you’re not participating.

Google has decided to do the IPO via a Dutch Auction. Rather than having Investment Bankers set the IPO price, it’ll “float” and find it’s own level during the Auction. Typically the IPO price is deliberately set a little low so that there is a market “pop” when it becomes truly publicly traded. This will be different.

And it is one of the reasons I won’t be participating. I predict that the IPO price via the Dutch Auction methodology will settle on a price that is too high. Upon free market trading I think it’ll rise a bit more for a short time and then crash, perhaps never to achieve its IPO levels again.

For this and other reasons, I’m going to take a pass.

8

Thank you for clearing up something I heard yesterday on Bob Brinker.
He mentioned “Dutch Auction” and Google in the same breath and I didn’t understand where he was coming from at the time.

Anyway, his conclusion was that the winners (the people who got the stock) would be the ones who overbid. But if they overbid, would that really make them winners?

9

Why is it “blatantly discriminatory”? Many companies have tiered shareholder structures, especially those that were founded as family concerns (Ford, DuPont, etc.) Since the purchase of individual shares of stock is entirely voluntary, I can’t really see where the discrimination fits in.

10

How can an ownership structure that gives one group of shareholders more influence over a company than other investors not be considered discriminatory? I understand that a company’s owners might not want to relinquish their control or have to accommodate the views of others, but if that’s the case I’d argue that the preferable solution, certainly from an investor’s point of view, is for the company to remain privately held. Tiered ownership structures are nothing but a method for companies to have it both ways, enjoying the access to capital that a public listing brings while limiting the influence of shareholders who aren’t in the anointed group that runs the company.

11

I also would avoid buying google out of the gate, too many questions that can’t be answered with straight book to book comparisons. Google is the engine of record now but while the noted “miserable failure” or “best president” google bombs may amuse or annoy your political leanings they do show a potential commercial vulnerability in the current search algorithm. In a similar light, how long has google been listing a little less than 4.3 billion (non image) url’s searched? It’s hard for me to tell but there is some geek speak to the effect that if google is using a 4 bit docID’s they may have maxed out their capacity till they rewrite to a more resource intensive process.

Granted the couple billion that the IPO will net them would go a long way to increasing their capacity but I suspect that once they have gone public the speculations as to google’s weaknesses will move from the slashdots of the world to the WSJ. I don’t claim to understand what technical issues, if any that google faces in the near to mid term but I do believe that any uncertainties of a technical nature will not be well received to an investing public who rightly are more concerned with how the stock performs than with how the service does.