IPO’s Success Doesn’t Justify Google’s Price (washingtonpost.com). In my Marketwatch column last week I discussed the fear of middlemen that the Google IPO would be a success and they might get cut out of future deals. If it was successful, then I said that the naysayers would start to push “sell!” Here it begins!
But now that the price is above the original minimum price range, I’m not in doubt. So I’ll repeat what I said three weeks ago. This price is insane. And anyone buying Google as a long-term investment at $109.40 will lose money. (If you’re buying Google to trade, assuming a greater fool will pay more than you did, you may do just fine. But I wouldn’t wait too long to sell.) This has nothing to do with Google as a company: It’s nicely profitable; I love the product. It has to do with math and with limiting factors — fancy language for the old truism that no tree grows to the sky.
Here are some Google higlights from arounds the web. I’m not doing much fact checking, because I don’t own Google stock. Hell, the folks that own it might not be doing any fact checking. John, I am sure, is fact checking everything. One bungled story can kill a journalist credibility. Measure twice, cut once as woodworkers know. Good luck Google, may your billions be a blessing rather than a curse.
1. The stock rose 27.4% in the two days after listing.
2. Wall Street analysts are predicting another 10% rise in the stock.
3. The stock seems set to live up to the hype and also opens the doors to more Internet stocks after a long hiatus.
4. Google has changed the rules of the international game
5. The Google issue worked out well both for investors and for the company.
6. Underwriters either deliberately or accidentally misread the market’s interest in the new issue.
7. The whole point of an auction is that it enables proper price discovery.
8. It (IPO) valued the company at $23 billion, roughly the same as General Motors.
9. Google Inc. ranks lower in corporate governance than any company in the Standard & Poor’s 500 stock index.
10. The post-mortems raised questions about the degree to which the Internet search giant helped to engineer its first-day price pop, when the price jumped 18 percent on Thursday.
That’s the list. Now for my analysis. Over 60% of the shares are held by insiders. This is good for insiders, but if you are an outsider things could not be as good as you might expect. Google has about two dollars of cash per share of stock, which is about 548.69M. You have got to wonder how the stock got to be worth all that cash, 109.40. With all this stock and so little cash, it’s nice that Google is creating new billionaires. I’m thinking up a new angle myself. I’ve got $2 sitting here, I wonder how I can make it look like $120.00. With Google, the magic may be that the illusion isn’t real but people want to believe it is real. Google stock could head for the 140-150 range and I hope they do. I’ll keep my two dollars and hope gas prices don’t go up this week. If you are making millions on GOOG, I guess you don’t care about petty things like the price of gasoline, you just do things like buy a new 80 grand Hummer and ride around like you are the king of the road. Fill’er up, I just made another40 million. So gasoline is $5 a gallon, GOOG is $200 a share. Life is GOOG err, GOOD. Oil is a tough business. I’m glad GOOG isn’t in control of gasoline prices. Gasoline could be $109 a gallon and climbing. Don’t sell that oil stock just yet. ExxonMobil may be undervalued, but Google may be overvalued. The market is becoming self-service. Pump up the share price, and remember no smoking at the pumps. You could set off an explosion. A share of GOOG could be worth three barrels of crude. That would be some illusion. Maybe the UN will develop a food for stock program soon. Honey, I just crashed the Hummer.
yep… It’s too high… that’s not sustainable given other factors about the company.
I think Google is here for the long haul; if so, the company will grow and the stock price will eventually go up.
Mr. Anonymous goes to Washington
Civil liberties iconoclast John Gilmore on Monday relaunched his legal campaign against the federal government’s requirement that airlines ask passengers for photo identification in order to board a plane. Not only do we have these wacky stock gimmicks, now this guy has a campaign going to let people with no ID board commercial flights. Next some idiot will start a civil rights for terrorists campaign. I’m starting to think that the whole country is going totally insane. I’m thinking of starting a campaign so everyone can take a .38 revolver on their flight. Who would think of hijacking the jet, knowing that eveybody on the flight has a .38 revolver and no ID? I guess all the new stock optioned rich at Google will start buying private jets. Jet fuel is going up again. So what, there won’t be any commercial airlines in another year.
The society of technology is here to stay like rush hour, where the dollar isn’t worth the paper it’s printed on and the stock isn’t worth the paper it isn’t printed on. Discredit the dollar, the stock is always worth more. The next phase will be convincing the Treasury to shutdown the U.S. Mint. While we are at it the SEC could be reinvented. Why waste paper and ink on money? We need more magazines and broker statements. With Google, who needs old economy institutions like banks or Wall Street? Didn’t this bubble get blown before? Now we have a rebound, honest we do.
Traffic jams reflect the rebound. The optimists point to indicators such as the return of traffic jams in Silicon Valley. Gee, that is always a good economic indicator. More people are sitting in traffic wasting gasoline. Life must be good, maybe my commute will last an extra 45 minutes or an hour if I’m lucky. Start building more self-serve gasoline stations Exxon. We are on a roll. Include me out.