ShopLocal goes live. The company behind this is owned by Gannett, Knight Ridder, and Tribune – the major newspaper companies. The whole things smells driven by corporate and merchant interests, as opposed to user intent. (Check the “About” page as to why – notice how they say they deliver “More Shoppers. More Often.” When I click the “About” button I prefer not to be told that I’m viewed as a fungible commodity.) I’d put my money on Yahoo and Google, if I were a betting man.
What’s interesting to me in decoding Google’s latest IPO twist is how the execs, VCs, and bankers made the decision to lower the price, and how they decided to cut the number of shares offered. Lowering the range happens all the time in iffy markets- often it’s a sign that the offering is in trouble. In the past few weeks we’ve seen it over and over, most recently with Lindows and PlanetOut. But in Google’s case, there was an additional actor: the nearly perfect window of market demand information. Armed with that information, Google’s managers could more accurately predict what will happen in the aftermarket once the offering goes live, thereby allowing them to lay out scenarios for several potential chess moves, and make the decision they think best.
Perhaps Google could have gone out within their original range, but it seems obvious that had they attempted to do so, the stock would have dropped significantly thereafter. And the only people who really made hay would have been insiders and the company itself – the investors would have initially felt soaked.
In the release cutting its range and size, Google announced that insiders have decided to hold back selling shares, presumably because market demand will only support so many shares at the new range. From the WSJ coverage:
The company also said Wednesday that the number of shares available to the public will be lowered by 6.1 million as existing holders will now only sell 5.5 million shares, down from about 11.6 million shares, “in view of this new price range,” the company said in its statement Wednesday. Company insiders, including co-founders Sergey Brin and Larry Page, are reducing the number of shares they will sell in the IPO. Venture-capital firms Sequoia Capital and Kleiner Perkins Caufield & Byers are now selling no shares at all in the actual IPO.
But this is worth thinking through a bit more. The release also noted that “In addition, the selling shareholders have granted the underwriters the right to purchase approximately 2.9 million additional shares of Class A common stock at the initial public offering price to cover over-allotments.”
I have no idea if this means the banks will in fact buy those shares for “over-allotment”, but it seems they are in the game in a much bigger way now. One could quite cynically claim that the price was lowered and the offering size cut so as to insure the “pop” so famously spurned by the auction process (if it were up to the banks alone, I’d call that a logical conclusion). But I can imagine that given lighter than expected demand, the banks, with their massive buying power (via institutional investors), might have gained the upper hand, and demanded that they get in on the action after being cut out of the deal for so long. Then again, I’m probably missing something insanely obvious here, so any of you investment banking types out there, please correct me if so.
I can also imagine all the parties involved wanted to make sure the stock would at least be stable in the aftermarket, and not drop precipitously. One can fairly assume that given the (more) perfect market data, the offering as it stands has a good chance of doing just that. Then again, going below 100 might just set off a speculative frenzy…running the stock up, providing the pop everyone was looking to avoid. Who knows?
That the VCs – John Doerr and Mike Moritz – are now selling no shares at all puts them back in a position of normalcy for most venture-backed IPOs. This is how it’s usually done – the VCs wait for the stock to rise in the aftermarket, then they sell.
Should be interesting to watch it open. When might that happen? Still unsure, though Google asked the SEC to make their statement effective today. If the SEC does (and it’s not clear they will, given they are still asking questions about the Playboy interview), the stock could trade on Thursday.
Thanks for all the posts on questions to ask Jerry and David. Turns out, we spent a lot of time on history and also on looking forward to the next ten years. We didn’t focus so much on the present. When I reminded Yahoo’s founders that they had ten years of experience running the site – they started in earnest in 1994 – both turned reflective. It’s not like they didn’t know it, of course, but there’s something about taking the time to think about that – ten years – that makes for a good conversation. I asked if they still believed in the vision and hype of the mid 90s – about how the internet was going to change everything – and they both said they did, but that timing was everything. It takes a lot longer than we’d like for basic things to change. Then Filo came out with a great line about the early promise of the internet – that we’d all become creators and producers of content – and how long it takes to fulfill:
That was the promise of the internet from day one -when Mosaic came out the whole idea was that anybody could publish now, that was the new thing …yet it took this long to get to simple blogging… If you said ten years ago that you could have blogging in ten years, and that will be the extent of it, people wouldn’t have been that impressed.
Indeed. In 1994, anyone claiming that in ten years, we’d have a robust self-publishing movement like blogging would have been drummed out of the room for a lack of vision. Despite Geocities or Tripod, it takes time for the ship of culture to change course. Makes me rethink my own sense of what might come ten years from now…
But probably soon…
Help Sid Yadav out, take his survey on search .
I gotta check this out – full text search in an aggregator…. Jäger 1.4.0 for Windows and for Macintosh.