August 18, 2005
Google At One
My students have emailed with some glee to remind me that I did not like Google's IPO one year ago -- at $85. The stock price ran up over 300% at its peak. I complained about Google's governance structure, it concentrated voting power in the founders, and about the need for the IPO itself. Google admitted at the time of the IPO that it did not need the cash and was only selling a small fraction of its equity. The public is, in essence, chasing a very small float of stock in a locked in minority position.
The reason for the IPO then? To enable insiders to sell stock in secondary offerings and get mounds and mounds of cash -- for Ferraris. Insiders later sold $1.7 billion in stock. So what does Google do on the one year anniversary of its IPO? A $4billion, 14.2 million share secondary offering. Story Google admits it does not have any plans for the new cash, that its rate of growth in revenue is going down, and that its expenses are going up. What??? The public will snap up the stock and Kramer will hype it (target $350 or something like that) on Mad Money. Show some earnings in a tech stock and we go nuts.
August 18, 2005 | Permalink
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