The Old Ask Joel Forum

Google

Why is Google going through the big banks for its IPO as opposed to doing a Dutch auction? Wouldn't the company get more money in a Dutch auction?

Also, being a maja playa in the software bidness, are you getting an allocation of shares?

dino
Tuesday, April 27, 2004

It's not guaranteed that they would get more money in a dutch auction. Theoretically they would, but in reality anything unconventional in an IPO will make them look suspicious.

Having the imprimeur of a couple of big, corrupt investment bankers like the crooks who brought us Frank Quattrone and Henry Blodget improves the brand equity of a public offering, making it look more serious. All the dutch auction ideas make certain types of investors think... "wait a minute, why don't the big ibanks want to underwrite this?" For the most part, the perception is that the quality of companies that use nontraditional financing is lower. There's no reason why this should be true, and I may be totally wrong about this, but it's one reason a dutch auction doesn't necessarily net more money for the company even though economic theory would hold that it should.

I am a Google shareholder, which I disclose every time I talk about Google, but only because full disclosure is the honest thing to do, not because my financial affairs are anybody else's business. I doubt if having a wee software company is a good enough reason to get an allocation ... even in the corrupt old days you had to be close to an IPO before they would waste shares on you that they could be giving to their Southampton neighbors.

Joel Spolsky
Fog Creek Software
Tuesday, April 27, 2004

Nah, I think you do it just to brag.

Anon
Tuesday, April 27, 2004

How did you get google shares?

Roose
Tuesday, April 27, 2004

Unless things have changed since yesterday Google is using a dutch auction for thier IPO.

Ender
Friday, April 30, 2004

In case anyone is wondering what that is, you can go to Google and type "define:dutch auction".

Example: " A procedure for buying and selling securities named for a system used for flower auctions in Holland. A seller seeks bids within a specified price range, usually for a large block of stock or bonds. After evaluating the range of bid prices received, the seller accepts the lowest price that will allow it to dispose of the entire block. " (source -- http://www.nyfc.net/glossary.html)

Joe Grossberg
http://www.joegrossberg.com

Joe Grossberg
Friday, April 30, 2004

What I don't understand about the 'dutch auction' process, is how does the allocation work. For example, if I'm prepared to invest $10,000.00 in Google, would it make a difference if I bid for 100 shares at $100.00 or 1,000 shares at $10.00, or ludicrously even 10,000 shares at $1.00!

Anonymously Yours
Friday, April 30, 2004

The bid is per share. If you want to bid for a hundred shares at $100 a share you are registered as having made one hundred separate bids at $100.

Stephen Jones
Saturday, May 01, 2004

The seller doesn't choose the lowest price that sells all the shares. He chooses the highest price that will sell all the shares.

Example: Bob is selling 2000 shares. He gets three offers. Fred offers to buy 1000 shares for $10 each. Jane offers $20/share for 1000 shares. Sue offers $30/share for 1000 shares. Bob sells at $20/share - the highest price at which there is enough interest to sell them all. If he sells at $21/share, he won't sell them all. If he sells at $19/share, he's leaving money on the table.

rob mayoff
Sunday, May 02, 2004

http://zdnet.com.com/2100-1104-5263206.html

Update: A mysterious mathematic message on a Silicon Valley billboard has sparked an online hunt for the author--but the mystery has been solved: it's Google.

According to a software developers' blog hosted by New York's Fog Creek Software, the message: { First 10 digit prime in consecutive digits of e }.com--decodes to http://www.7427466391.com/ and a further mathematical test which at first eluded decryption

a aab
Friday, July 09, 2004