Capital Markets

Analysts, Gamblers Differ on GOOG Outlook

Experts continue to ponder the price of Google's IPO.
Ed ZwirnAugust 18, 2004

What price will Google fetch for its IPO shares and in secondary trading? The answer to this question can vary, depending upon whether you ask an analyst or a bookmaker.

At the end of trading day on Tuesday, the Securities and Exchange Commission had not provided the Mountain Valley, Calif.-based search engine with its request for a final registration approval. The company requested that the registration statement be made by 4 p.m., but SEC spokesman John Heine said that there would be no decision yet, the Associated Press reported. No reason for the delay was given.

As soon as the SEC gives its approval to Google, the company can price its IPO and successful bids may be accepted as quickly as an hour afterward, the AP noted. Google plans to trade on the NASDAQ under the ticker symbol, “GOOG.”

Several news reports cite sources close to the deal as predicting that trading is more likely to begin on Thursday, giving the firm more time to end the unconventional bidding process it is using and finalize its registration and pricing.

The pricing of Google shares is being done in a “Dutch auction” bidding process that aims to open participation in the IPO to individuals and not merely institutional shareholders. Prospective buyers bid on the price they are willing to pay for the stock and how many shares they want to buy. When all the bids are in, Google will allocate shares on a pro rata basis to anyone who has bid at or above the initial IPO price, which is set by a threshold price that Google will accept.

Google has said it hopes to sell nearly 26 million shares for between $108 and $135 each, raising around $3 billion. And a pre-IPO report issued last week by Standard & Poor’s Equity Research Services backs up Google’s estimated pricing, calling the range “reasonable” in a report. It even narrowed the expected Google-announced range, to $121 to $127 per share.

On the other side of the analytical fence are the gamblers. SportsBook911.com, an online betting service, announced from San Jose, Costa Rica on Monday that it had temporarily suspended “over-under” wagering on the Google IPO auction after an onslaught of bets from New York and California saying the search engine would have an opening price of less than $110 per share, the mark set as the “over-under” by the wagering site.

“The reality is that the general public does not usually buy stocks over $100, which we think will severely reduce the possible investor pool, therefore there will not be enough buyers to support that price,” according to Mike Nickels, president of GC Sports Group, which operates SportsBook911.

The temporary suspension was lifted later that day with a revised wagering platform
that includes five price points, with varying odds for each, for the stock’s opening price and closing price. Initial wagering was for the opening price only.

“We received an extraordinarily high volume of wagers from people in New York and California saying that the IPO auction would result in the stock opening below $110, which prompted us to revise our closing price betting structure,” Nickels said. “Given the financial connections of people in those two cities, we quickly recognized that we needed to change our wagering structure.”