Google Inc debuted as a public company last week, but that did not stop the debate over whether its auction-based IPO was a success or will influence future IPOs.
Google said in April that it would pursue an IPO, making the decision as it faced regulatory requirements to start disclosing its financial information. But the idiosyncratic company, the brainchild of two Stanford University graduate students that revolutionised Web search, decided it would hold the IPO on its terms.
Google selected Morgan Stanley and Credit Suisse First Boston to lead the offering, but it pushed Wall Street tradition aside and chose a modified version of a Dutch auction to sell its shares.
Instead of having bankers use their discretion to price and allocate shares, Google chose an auction that let hopeful investors to place their own bids and outline the price they wanted to pay.
When all was said and done, Google shares rose 18 percent in their market debut on Thursday to $100.34 from an IPO price of $85.
For some, Google's first-day gain and its ability to raise $1.67 billion vindicated the auction process that had drawn a host of detractors.
The deal also appeared to be successful from a technology standpoint, with the 28 underwriters collecting bids from hopeful investors and then notifying them of the outcome without major glitches.
But the gains came after the deal priced at the low end of an estimated range of $85 to $95 per share, a range that had been cut from Google's initial target of $108 to $135 per share.
The final size of the offering was reduced from 25.7 million shares to 19.6 million shares.
The pop also came after Google relied on more than just the auction and potential investors to set the offering price.
Rather, Google said it could work with its bankers to price the deal below the level determined by the auction if it wanted to get a wider distribution of its shares or avoid "downward" pressure on its shares shortly after their debut.
Some said it will take more than just the debut to evaluate how successful the offering is.
Comments
Comments are closed.