Selling Google - why?

Unless you've been on a desert island you're probably aware that Google plans floating (at least according to media reports), some time in the new year. Given that the markets are starting to return to some kind of stability but are still below where they probably should be, why? Why not wait a year or two and do it then? Are they afraid that either they've reached a peak, technology-wise, or that someone is going to come along and knock them off their perch as number one?

Sunday, October 26, 2003

hand.bird == 2 * bush.bird

Bella
Sunday, October 26, 2003

"still below where they probably should be"

On what would you base this statement?

nat ersoz
Sunday, October 26, 2003

1. Raise some cash without venture capitalists, perhaps to develop something even greater, or simply to get rich.

2. Considering that after an IPO, most stock options involve vesting for a few years, going public during a depressed market one expects to go up (as you do) isn't a bad thing.

3. "Google is expected to float early next year. Analysts say the timing is perfect as interest in the internet sector has driven share prices of key players like Amazon, eBay and Yahoo sharply higher in the past 12 months."

4. "The motivation for taking the company public appears to be to provide a market for existing investors, including venture capital firms and the more than 1000 staff who hold shares."

* 3 and 4 are quotes from http://www.theage.com.au/articles/2003/10/26/1067103275843.html

=b~
Sunday, October 26, 2003

now is a great time to sell. they have developed a search engine that many other places are now copying. the have alot of traffic that many others are now trying to get. for the original people maybe the fun is over.

Sunday, October 26, 2003

They're a verb. Not even Amazon pulled that off. :)

Philo

Philo
Sunday, October 26, 2003

They're much better off selling now. Gullable people will buy the shares and they can make a fortune.

In 5 years time they may have been overtaken. There's no lock in in the search engine game. If someone makes a better search engine, people will switch to it and google will be screwed.

So I think they're doing exactly the right thing. They own the search engine space at the moment. They have to sell while the selling is good.

Sum Dum Gai
Sunday, October 26, 2003

even the NYSE and Goldman Sachs sold themselves during the peak of the boom. Let the buyer beware.

Sunday, October 26, 2003

I think their market cap will be bigger right now than it will be in a few years.  They probably think the same thing.

"but are still below where they probably should be"

In fact, the markets are _exactly_ where they should be.  They always are.

Sunday, October 26, 2003

"markets are _exactly_ where they should be.  They always are"

Like during the .com boom, you mean?

Monday, October 27, 2003

Sometimes it amazes me that people still believe in Markets.

Do you think we should tell him about Santa?

Ged Byrne
Monday, October 27, 2003

Markets are always where they should be. That is the clearing price is the price that the next person is willing to pay.

Sometimes this is based on 'fundamentals'. I use  this word with trepidation, but yes, sometimes folk do purport to compute the value of a security based on the expected cash flows, or some other real and tangible measurement.

In a lot of cases though, the value is based on the greater fool theory. One person buys the security with the sole hope of finding a greater fool to pay more money for it. The problem with the greater fool method is that while the number of fools is pretty constant, the number of schemes chasing these fools is not, and a new one comes to market every day. At some point, the supply of schemes exceeds the number demanded by the fools, hence a price correction.

In both cases, the market is showing the right price ... what someone is willing to pay for it. The fact that the reasons for the valuations are so different is inconsequential and is really a topic for another discussion.

Tapiwa
Monday, October 27, 2003

If you mean me, Ged, I don't believe in them, or at least - I believe they exist, but don't believe they fulfill the purpose for which they were created nor follow sensible economic principles. What I haven't managed to work out is whether the stupid follow the greedy or the greedy follow the stupid.

Monday, October 27, 2003

If you define "the right price" as "any price that people are willing to pay" then the statement "markets are always at the right price" is vacuous. It is, of course, difficult to give an obviously-better definition of "right" in this context, but here's one possibility. Imagine that some miracle makes all participants in the market much less irrational and supplies them with all the publicly-available information that's relevant to their buying and selling decisions. The "right price" is what would emerge in that slightly idealized market.

Unfortunately this hypothetical scenario is just *so* different from what we actually have that the notion of "right price" that comes out of it may not be very useful in practice :-).

Gareth McCaughan
Monday, October 27, 2003

That the markets are always at the right price is not a vacuous statement.  It's more of a truism.

Where it gets interesting is examining price points on an individual basis. 

Monday, October 27, 2003

Hmmm, no one seems to think that Google wants the money for the usual reasons (besides the getting-rich reason): to enter new markets, develop new products and services, and so forth.

Ask a different question: if Google has an IPO, what should they do with the money?

Portabella
Monday, October 27, 2003

The "get rich" argument probably doesn't pan either. Estimates are that they generate profits of about 100M USD/year. I suppose there is "rich" and "stupidly obscenely excessively rich" so maybe they are just going for the latter :^)

Monday, October 27, 2003

Why an IPO? Easy, right now the owners of Google basically have all their eggs in a single basket. Should (or when) another search engine become more popular (or advertising rates sink even lower...), the majority of all their
assets is tied up in Google.

An IPO gives them an easy way to turn some of Google into cash that can be invested elsewhere. It also makes their remaining Google holding that much more liquid - it's now a simple stock sale rather then a private asset sale.

RocketJeff
Monday, October 27, 2003

I've heard that there's a rule (SEC, I presume) that a company is required to go public if the company wishes to expand ownership beyond a certain number of people.  Since Google is growing, they may have to go public to be able to offer company shares to recruit/retain top talent.  Can anyone confirm this rule?

will
Monday, October 27, 2003

A company never needs to go public, but if it has beyond some number of shareholders (500?), it needs to report the same revenue / earnings numbers as a company that is public.  Or something like that.

schmoe
Monday, October 27, 2003

It's possible that they feel pressure to go public from the top talent they've recruited in the past - they presumably gave away lots of stock options to attract people, and now these people would like a way of getting cash instead.  In this point, it's not necessarily that these people think it's a good time to sell, just that it'd be nice to turn some of that paper money into real money.

schmoe
Monday, October 27, 2003

They seem to be following the Microsoft model, rather that the .com model.  Microsoft was already a strong, successful business when they went public.  Google will be too.

Jim Rankin
Monday, October 27, 2003

""markets are _exactly_ where they should be.  They always are""

"Like during the .com boom, you mean? "

Yes, the markets during the boom were valued at what the masses (wieghted by money) thought them to be valued at. Of course, if you are so smart as to know a different value to the markets then put your money where your mouth is.

Monday, October 27, 2003

I already did. It is in (UK) property.

Tuesday, October 28, 2003

suggesting that  you think UK property is undervalued??

Tapiwa
Tuesday, October 28, 2003

The properties I have were, yes.

Tuesday, October 28, 2003

Just out of interest, what is your opinion of the property market at the moment??

Is there still room to rise, or are we reaching the top?

Tapiwa
Tuesday, October 28, 2003

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