Google is going to Auction its IPO

In a novel approach to its IPO, Google is considering holding a massive online auction to sell the shares directly to investors, not via an investment bank.
Google would sell a stake of about 10 per cent, valuing the company at about $20 billion. Google is the company whose name has become a verb (to “google” something is to search for it on the internet). In a novel approach to its IPO, Google would sell a stake of about 10 per cent, valuing the company at about $20 billion. Goldman Sachs, Morgan Stanley and eight other investment banks are vying to underwrite a $US2 billion ($2.84 billion) float by Google Inc, the world’s most popular internet search site, said a banker competing for the business.

At one level the news that Google is considering holding a massive on-line Initial Public Offering (IPO) is, hopefully, a barometer of the growing revival in technology stocks and Internet-related stock in particular. But while investment banks may underwrite the issue, Google is understood to be contemplating an online auction of the shares which would limit the level of fees to banks. An on-line offering via a web-based auction of shares in the company would have number of distinct advantages. It would avoid the costly investment banking fees, which invariably accompany an IPO. The price literally would be set by the market than the creative methodologies, which have been devised by investment banks to value web based technology stocks, subject to any underlying reserve price, which the company may wish to set on the stock. Any underlying perceptions in the eyes of potential investors that the price was set to low or that favoured clients were benefiting from preferential allocation on the stock, would be avoided. The stock would mark its debut on the market by a strong display of transparency with the way its IPO was handled and its price would reflect the market price. Integrity and reputation in this context are of significantly greater importance with this stock than they are with most IPOs.