Google Takes Bids for IPO Auction
Top Web search engine Google Inc. began taking bids Friday for the auction process it and company insiders will use to sell as much as $3.3 billion worth of shares to the public for its planned initial public offering in mid-August.
Bidders can apply to get an identification number to participate in the so-called Dutch auction at www.ipo.google.com. Those who register may submit bids through a broker to buy a specific number of shares at a specific price.
Google and its underwriting bankers, Morgan Stanley and Credit Suisse First Boston, will use those bids to determine the highest price at which there is demand for all of the shares, called the clearing price. The offer price will be at or below the clearing price.
Google said this week that it expected to sell its shares for $108 to $135 each, which would give the Mountain View, Calif., company a market value of $29 billion to $36 billion. Some investors have questioned whether Google’s growth prospects justify that rich valuation, but others said it was reasonable compared with that of rival Yahoo Inc.
The auction process is designed to put small retail investors on a more equal footing with the big institutional funds and influential investors who have traditionally been given better access to IPO shares.
Many hedge funds, on the other hand, will face an uphill battle winning shares in the Google IPO.
Managers of the stock sale have begun informing some hedge funds that they won’t be allowed to use the process to bid on the IPO, according to people briefed on the IPO.
Representatives from the underwriters declined to comment. A Google spokesman also declined to comment.
Some may be able to bid for shares through the institutional tranche, but many, because of their smaller size, are likely to be frozen out of the offering.
Hedge funds, and, conceivably larger investment firms, that don’t have a client relationship with Morgan Stanley or Credit Suisse won’t be allocated shares.
Hedge funds have often been blamed as a culprit for much of the first-day volatility that comes with stock offerings, since they are most likely to “flip,” or sell shares quickly once trading begins, often for a quick profit.
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Dow Jones/Associated Press and Reuters were used in compiling this report.
