I have finally climbed out of the hole that I have been stuck in for the past few months. I have also managed to erase the over 1,000 bogus spam comments posted to this blog — what a nightmare. Now on to interesting topics.
I am quite perplexed as to why it has become so fashionable (particularly in the Bay Area) to bash this Google IPO. Granted, Google is not a perfect company and their road to IPO has had its share of bumps and bruises. But I find it quite odd that people have been so raucous in denouncing the Google IPO. There are a few things that I find quite perplexing:
Valuation – Every seems to want to say the valuation is too high. It is certainly aggressive. But if you look at the resources that Microsoft is devoting toward unseating Google and you look at how much attention Yahoo! is paying to Google, my sense is that the proposed $30+ billion valuation is of the right order of magnitude, even if the exact dollar value might not be exact. I don’t know two many IPOs that were priced exactly right and am willing to give them the benefit of the doubt.
Dutch Auction – So let me get this straight. If Google had gone the traditional IPO route, people would have roundly criticized them for supporting the old boys method of distributing IPO shares. Now that they have decided to go dutch auction, they have been getting all of this criticism for having a share price that’s too high. With such a high share price, IPO participants won’t have the big first-day run associated with a successful IPO. So if I understand this line of logic, there is no way to win. Either you are helping the rich get richer with a traditional IPO or you are giving people a low near-term return option with the dutch format. IPOs are as much about expectations as they are about reality and I think we should cut Google some slack here.
Basically, someone has to capture the value. If Google thinks that a dutch auction is the best way for the company to capture value I think it’s great.
All in all, I feel like there are a lot (and I mean a lot) of people out there who are seriously afraid of getting left with egg on their faces if the Google IPO is not successful. Just to be clear, Google has lots of competitive challenges out there. But I think there were a lot of people out there whose credibility took a hit during the bubble and they are taking a “better safe than sorry” approach to this IPO. I find it strange that there is so much more public attention being paid to the risk factors with this IPO than were paid to the recent IPO of salesforce.com.
Don’t get me wrong — Google has made some mistakes along the way and their future is far from certain. But listening to the rhetoric you would think that the company is doomed.
Comments? You can always email me at blog @ charleshudson.net