Google IPO reviewed

It's a case where the company took control of the process and dictated to the investment bankers, and they're not used to that situation," said Jay Ritter, professor of finance at the University of Florida and an initial adviser to Google on the Dutch auction system. "A lot of the underwriters did not go out of their way to tout the stock." Furthermore, the company made a number of mistakes, magnified under an intense media spotlight. _ Google failed to account for 23 million stock options granted to employees and was forced to offer to buy them back; _ Company founders Sergey Brin and Larry Page gave an interview published in Playboy magazine a week before the IPO was to have hit the market, a violation of U.S. Securities and Exchange Commission rules. _ The company went ahead with the IPO in a very oversold market, with technology shares particularly battered in recent months. _ The Dutch auction system was designed to garner as much money for Google as possible while limiting the usual jump in price on the first day of open trading. While the auction priced Google at $85 per share, the stock quickly soared to $100 in the first hour of trading, and closed Friday up $7.98 at $108.31. With better pricing, Google itself could have gotten that extra $23 a share - or more than $30 million. However, with Google so popular with both investors and the public, most Wall Street firms felt they could not afford to sit out. Only Merrill Lynch publicly dropped out of the auction, reportedly unhappy with the cost-benefit equation. Google may not have met Wall Street's definition of success, since the Dutch auction system poses a threat to major underwriters' business models. But it nonetheless raised $1.6 billion, and its investors saw strong gains in the first two days of trading. "It's certainly a success in that Google went public, and they did it the way they wanted to," said Matt Rhodes-Kropf, associate professor of finance and economics at Columbia Business School. "But it was a failure in the sense that they didn't get the price they could've gotten if they had gone through the traditional method. And they did not eliminate the first-day jump."

No matter where they stood on the success or failure of Google's IPO, most experts and insiders agreed that other companies would attempt IPO auctions in the future, and would try to involve the public to one degree or another. And Wall Street would continue to be, at best, ambivalent about the concept. "Certainly, the lead underwriters did not want to use an auction. In that regard, a lot of them have not been anxious to paint this as a success, since it's a threat to their business model," Ritter said. "But outside of the top 10 or 15 underwriters out there, there are plenty of smaller underwriters who would be happy to pick up the crumbs and try to make inroads using the auction system. There aren't that many IPOs around, after all."

Google's spats with venture capitalists

Very interesting history of Googles relationships with named venture capitalists... Tensions between entrepreneurs who start a company and venture capitalists who finance them are as common as spats between husband and wife...the rows between Google's two strong-willed founders and their venture capitalists are legendary up and down Sand Hill Road.