How Miscalculations and Hubris
Hobbled Celebrated Google IPO
Euphoria Ebbed, Tech Stocks
Sagged, Till Firm Cut Size,
Priced at a Low $85 a Share
Blow to Dutch-Auction Method
I’d love to link to it, but it’s paid sub. This is on the front cover of the Journal the morning the stock will open on the NASDAQ. Get the sense the banking community is pissed yet?
Google Inc. may have needed Wall Street after all.
The Web-search giant’s quest to reform the Street through an unconventional initial public offering backfired, as Google yesterday sharply cut the size of its stock sale and then set an IPO price far lower than it had anticipated: $85 a share.
A combination of Google’s own hubris, stubborn investors and a deteriorated technology market transformed what was billed as the hottest IPO of this short century into a rather messy affair….
…The price “says that a type of auction going out to the public like this is a failure because it raised uncertainties to such a level that people backed away,” said Matthew Rhodes-Kropf, an auction theorist at Columbia University’s business school in New York. By creating uncertainty, it “got Google a worse price than they could have gotten using a standard mechanism,” he said…
…They managed to tee off the broader constituency of Wall Street, and it’s obviously hurt them,” said Brad Ruderman, head of Beverly Hills, Calif., hedge fund Ruderman Capital Partners, who was sitting out the Google auction. “Wall Street wins again.”…
…In the end, Messrs. Page and Brin may have themselves to blame for setting expectations too high, in regard to both the pricing and their ability to avoid Wall Street’s usual ways. The $85 price was about where many financial experts had pegged the shares’ values early on….
…When Google executives, including Messrs. Brin and Page and CEO Eric Schmidt, met with mutual-fund and hedge-fund investors at New York’s Waldorf-Astoria Hotel the day after the pricing announcement, the presentation was light-hearted, and thin on details. Some investors sitting in the ballroom began speculating with each other whether the executives had spent any time practicing the presentation, or if they were winging it.
Glenn Krevlin, a New York hedge-fund manager who runs Glenhill Capital LLC, said he had no interest in the stock after attending the road show. “They didn’t tell you anything. They came across as high and holy,” he said…