The Story Behind The Story Of The Google IPO?

Earnings, IPOs, and the like

from the that's-an-awful-lot-of-insider-selling... dept

This morning, it seems like the big Wall Street tech story is the official release from Google about what they think they’ll raise from their IPO. Looking over all the different coverage, it appears that many (especially in the financial press) seem to be getting the story a little mixed up. The basic facts seem to be that approximately 24.6 million shares will be put on the market with a range of $108 to $135 per share. As noted in the story, some seem to think that breaking $100 may prove to be a psychological barrier for many retail investors, even if the actual price per share is meaningless. Still, if the price is a psychological barrier, rather than a calculated decision, the investor probably shouldn’t be buying anyway. A minimum bid from anyone must be for five shares, so anyone who wants in is spending over $500. The range is higher than expected, and could lead to a valuation pushing $40 billion. One analyst makes the bizarre statement that: “The question is not what the company is worth, but instead what people will pay for it,” which misses the fairly simple, but important, point that the price people are willing to pay for the stock is what the company is worth. Meanwhile, many news articles are claiming that Google will raise $3.3 billion in the offering, which is not true at all (or at least, extremely unlikely). The details show that Google is likely to bring in about $1.66 billion (and possibly as high as $1.9 billion at the top of the range). That’s because only 14.1 million of the 24.6 million shares are actually being sold by the company. The other 10.5 million are being sold by insiders. Now, that’s a curious point that no one seems to be focusing on. While insiders do sometimes sell during an IPO, it generally doesn’t look too good. While there are plenty of reasons (liquidity, liquidity, liquidity) that people might want to sell, usually insiders get locked up for a bit. It does happen, but in this case, an awful lot of that $3.3 billion (or whatever the amount actually is) isn’t going to the company, but to others. The initial IPO filing tried to spin all this insider selling as a good thing, but that’s pretty questionable. If people really believe in the stock, why are so many selling it at the very first chance they get? Doesn’t inspire the most confidence in the world.