Is Google IPO Too Complex?
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By employing an unusual technique called a "Dutch auction" to price its initial public offering, Google could be making the process too difficult for the small investor, according to some critics.
The Google Dutch Auction works like this: The company and its advisors set a price range for a share of stock. That part has already happened. Tom Taulli with IPO research site CurrentOfferings.com takes it from here:
TAULLI: You will then call your broker up, get a bidding number, and you can start placing bids on that IPO based on where you think the price should be. If you bid at a price higher or at the price that the company ultimately sets for the price of the IPO, you will get shares. You may not get all the shares you want, but you should get some of the shares at whatever the final price is. Everyone gets the same price. If you bid above that price you still get the lower price.
In its IPO prospectus, Google says it wants to let small investors in to the game. But Taulli says investors are so unfamiliar with Dutch auctions that many will be left out.
TAULLI: If you look at the prospectus, they've set the terms of how the auction will operate. And it's long. And it's complicated. And there's a learning curve about how this auction will operate in terms of how you put in a bid, reconfirm a bid, back out of a bid. There are a lot of extensive rules here that will be intimidating to a lot of individual investors, and I think even institutional investors who are not familiar with this system may even be intimidated themselves. On the one hand it's an open system, but it's so new and there are a lot of complications here because there are a lot of rules, it may be in a
way exclusionary because people may get frustrated and just give up.
In the San Jose Mercury News this week, technology columnist Mike Langberg lamented the complexity of the Google IPO.
LANGBERG: Google has made a big deal about wanting to do the right thing about giving small investors a fair shot at getting into the IPO process, and as anyone who has followed this knows, in the dotcom era there were a lot of abuses. Small investors were routinely denied access to IPOs. I think Google has started out with noble intentions, but just got totally tangled up in the process.
To better figure out the Google IPO, Langberg is seeking a front row seat.
LANGBERG: I am going to become a participant in the Google IPO. This goes against our normal ethics policy where we are not allowed to own stocks in companies we cover. I got an exemption from my editors. I am going to become a bidder for the minimum order of five shares and I will sell the shares shortly after the IPO. I'll donate any profit to charity. I'm hoping that by actually going through it myself, I'll be able to see exactly how it works, which is something I haven't been able to figure out up to now.
Google declined to comment, citing its federally mandated quiet period restrictions.











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