Why is it that I have the exact same feeling about everything Google announces... and that feeling is this:
WOW... what a great concept, that is awesome! Why hasn't someone else done that yet!
This feeling of excitement is then always followed up by disappointment. The company is so visionary at times, and then so poor at executing on that vision. I have rambled about the poor execution of Gmail, but tonight it is time to ramble about the poor execution of the IPO.
The Google IPO process was supposed to represent a major break from the standard IPO process. In the past shares were distributed to the underwriting firms to dole out as they saw fit. The underwriters then gave shares to their best clients, or even execs whose companies they want to do business with. The shares are then priced at a less than fair value price to ensure everyone in on the ground floor makes out. Essentially it was a scheme that promised only that the rich would get richer. Not only were the underwriting firms lining the pockets of their best clients (or people they wanted to have as clients), they typically took somewhere around 10% of the total IPO price... so they got 10% of the cash, lined the pockets of their friends, just for acting like a clearing house.
Along comes Google, and properly they approach a situation where they have market power and decide they don't like the current process... They decide that their IPO should be available to everyone. They also think that 10% is far too much to give up to just a group of suits who do no work except put together some slick powerpoint and excel (Sorry to all my investment banking friends out there). And lastly, they also decide that they will determine the price that the IPO will go out....
The above is the GREAT CONCEPT... AWESOME! part for any Google concept.
Now for the poor execution. The first mistake is that the company waited until August (when most of Wall Street is on vacation) to IPO. Secondly, the per price share of $108 - 135 will appear far from attainable to the average investor that Google was trying to open the market to. Here is my biggest pet peeve, while the company states that the IPO auction is available to anyone, the firms running the process of accepting bids have NOT made this auction available to the general public. Check out this quote from my fidelity website:
"Participation in the Google IPO through Fidelity is reserved for brokerage customers with a minimum of $100,000 in certain assets held at Fidelity, members of Premium Services, or customers who have placed 36 or more stock, fixed income, or option trades in a rolling 12-month period."
Can you tell me how many "average investors" can meet these requirements? How many school teachers have $100k sitting in their brokerage accounts? How many construction works have traded more than 36 times this year?
Like everything about Google, they offer a glimpse of what a revolution could be, but ultimately they fall short and produce evolutionary results.
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