[399] of GOOG

GOOG is what Google is known to the investors in New York and everywhere else. And on Reuters:

SEATTLE (Reuters) – Friday the 13th was decision day for investors weighing whether to bid for shares in Google Inc.’s initial public offering. The big question now is, how many of them were feeling lucky on an unlucky day.

Google is probably the initial public offering of the year. Google is the most successful search engine ever; not only it is big, it is profitable. Last Friday was the last day for interested investors to register for the Google’s IPO auction. The price of the offering is expected to be announced today.

What is the most peculiar characteristic of this IPO, at least for me, is the auction itself. Now, auctions perhaps are typical when the issuer of IPO presents the shares to the underwriter. Furthermore, most IPO’s that I have heard of are sold at some predetermined price, if I am not mistaken. Google, through Morgan Stanley and Credit Suisse First Boston as the lead underwriters, is doing something unconventional. The IPO will be sold to the public, not to the underwriter, using a modified Dutch auction, also known as single-priced auction.

I do not know which part of the method is modified but through my financial economics class, I do know that the winners of the bid will pay the lowest winning yield for the shares. Take note, the lowest yield means the lowest cost to the issuer (borrower of the money). Now, let’s say there are three bidders, A, B and C and there are 40 units issued. All participants make their offers known. A want 20 units and offers 5.0% yield. B wants 20 with an offer of 6.0% yield and C wants 20 with 7.0% yield. C will lose out and both A and B will win the bid. At the same time, both A and B will pay out 6.0% yield. If A were to pay its initial offer, that would make the auction as something known as multiple-price auction.

Regardless of the method of offering used, each Google share is expected to range between $108 and $135. At the same time there are 25 millions shares available, making a possible capitalization at around $3 billions. That is a cool $3 billions.

It will be traded on NASDAQ, the home of the tech bubble. And this is financial history in the making.

And Blogger is part of Google and this site is powered by Blogger. I am proud to be part of it. Hmm…

p/s – I’ve just received an interview request from The Star, Malaysia. I am not really sure the person that sent me the email was referring to ReCom.org or ReMag, but hey, this is going to be fun. And I bet the special branch would take notice too. LOL! I’m flattering myself. Damn me.