| By Jeremy Geelan |
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| August 30, 2004 12:00 AM EDT |
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19,296 |
"Google's auction process was messy, and the reduction of the expected offering price may have scared away some investors. But it worked well in the end and may persuade other companies to try something similar." That is the verdict of the New York Times's Floyd Norris, reflecting on last week's Google action process and IPO.
"Google's Dutch auction," writes Norris, "was intended to assure that anyone who wanted to get in could - at least in the United States, as the offering was not registered overseas. That led to fears that the price could plunge the first day, but it did not. It appears the company and the underwriters priced it low enough to ensure an increase, and the price rose by 18 percent the first day and ended Friday 27 percent above the offering price of $85."
Norris also manages to make one point not being emphasized enough elsewhere:
"One thing that is remarkable about Google is how large the offering was, compared with many previous ones. Consider six previous offerings of new technology companies, all highly publicized at the time and all successful in the market for some time, though not necessarily for long. Between them, Microsoft, America Online, Netscape, Yahoo, Amazon.com and Priceline.com raised $470 million, barely a quarter of the $1.67 billion Google investors plunked down at the offering."
He also points out that wheeras in 1986, Microsoft's offering price valued the company at three times revenues in the previous 12 months, and 16 times earnings, the figures for Google were 10 times revenues and 85 times earnings.
"The high valuation accorded Google means that it will have to grow at a strong pace for many years to come to justify the prices being paid," notes Norris, "and the sheer size of the $29.7 billion market capitalization it has will make that growth even more impressive if it does come."
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