Question: I want shares. What do I do now? Answer: Get a copy of the initial prospectus. Read it. Contact your broker. Make sure they have a relationship with one of the underwriters. Determine a price and number of shares. Submit via phone, fax or internet. Then wait.
Q: The prospectus says: "We seek to enable all interested investors to have the opportunity to qualify and bid." I live outside the US, I assume this means I can still qualify. Is this true?
A: Probably not. The prospectus says: "We have not undertaken any efforts to qualify this offering for offers to individual investors in any jurisdiction outside the US; individual investors outside the US should not expect to be eligible to participate." It is extremely unusual for US companies to register to sell IPO shares in other countries though Google and its underwriters may decide to make some available to institutions via private placements.
Q: Is an auction less risky than the traditional method used to price IPOs?
A: Not really. Google shares could fluctuate wildly. Bidders that receive shares may decide there is little incremental demand above the offering price, meaning they paid too much. This could cause a sell-off. Also, the auction method could attract a larger number of retail investors. Google has warned these might not have the patience of professionals, leading to share falls.
Q: I am one of those impatient retail investors. I intend to flip the shares as soon as I can. Will I succeed?
A: Maybe not. Google warns: "Buyers hoping to capture profits shortly after our Class A common stock begins trading may be disappointed."
Q: Who are the underwriters?
A: Morgan Stanley and Credit Suisse First Boston. Many other brokerages are likely to be involved.
Q: How will the auction process work?
A: There are five stages: qualification, bidding, auction closing, pricing and allocation. To qualify for bidding you must prove to the underwriters you understand what you are getting yourself into. The price you pick will indicate whether this is the case.
Q: How much will the shares cost?
A: The auction process will result in what is known as a clearing price for the Class A shares. The clearing price is the highest price at which all the shares offered may be sold. But Google and its underwriters do not have to use this price.
Q: What factors might make it set the IPO price lower than the clearing price?
A: Google's stated goal is to set an IPO price that results in trading of its Class A shares that does not move significantly up or down relative to the market in the days following the sale. Anything that indicates that might not be the case could trigger their decision.
Q: Who actually gets shares?
A: All investors who submit a bid equal to or greater than the IPO price will be eligible for an allotment.
Q: So should I just submit a really high bid for a lot of shares?
A: No. Google will show no preference based on the "extent to which the bid price exceeds the initial public offering price". You need to find a "Goldilocks" bid. Not too high, not too low, just right. As for the number, ask for what you can afford.
Q: I love Google. I use it everyday. Is that a good reason to buy the shares?
A: No. You use toothpaste every day as well. Do you own Colgate-Palmolive shares? The Google founders want investors who have read the prospectus and its financial data and believe Google is a solid business.
Q: Is it?
A: Google is profitable. Its balance sheet is strong. But the company is also careful to say that buying its shares is a risky venture.
Google faces intense competition from Microsoft and Yahoo About 95 per cent of Google's 2003 net revenue came from advertising. New technologies that block internet ads could damage the company.
As Google becomes a larger company, it will be hard to sustain its rate of growth. It will also have to work harder to maintain internal controls to prevent fraud. - (Financial Times Service)
