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Cramer: Google IPO Proves System Is Corrupt

By - April 12, 2004

traderwoesA great Cramerian rant on why the Google IPO could be a “train wreck.”

Excerpts:

And Google could be worth every penny, at least the pennies that the investment bankers are pitching it for, although it may not be worth what it ultimately ends up trading for. That’s because the disparity between where the bankers price the IPO and where it opens could be the largest gulf in the history of IPOs, in part because neither the government nor the industry has done a thing to fix a system that broke down and descended into corruption and stupidity during the dot-com heyday. Put simply, Google could end up being the biggest IPO, and the biggest IPO train wreck, in history….

When you combine the fervid nature of the Google fans with the fact that all Google fans own personal computers attached to the Web and therefore can access their broker with a keystroke, you get the potentially toxic combination of tons of uninformed buyers clamoring for any piece of Google stock that can be had, either on the deal—unlikely, given that the process favors the big boys—or after it starts trading on the open market. That means Google could have one of those bizarre trading patterns we saw at the height of the bubble in 1998 and 1999, when the bankers brought the deal at $25 and the stock opened for trading at three or four times higher than that…..

Google, the company, may be the real deal, but Google the stock may just show us a return to the bubble days that we all thought had mercifully been put behind us. Or, to put it another way, Google, now synonymous with “to search,” could, the moment it opens for trading, become synonymous with “to fleece.”

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  • Frank Ruscica

    Any idea why Google bailed on the auction approach?

    Thanks,