CurrentOfferings.com Story:

Average investors will get shot at Google stock

Reprint From The Chicago Sun Times

By Howard Wolinsky, Business Reporter, Apr. 29, 2004

So, bunkie, you missed the boat on the Netscape, Amazon, eBay and Yahoo! IPOs, and this time you figure you're going to strike it rich on the pending initial public offering for Google, the wildly popular search engine that built a better computer mousetrap.

Well, some theorize that this time it just might be possible for you to actually get in on the gravy train, and turn a quick profit by buying Google shares at the opening price.

But some party poopers suggest that a Google IPO will only result in the rich getting richer.

At this point, Mountain View, Calif.-based Google is mum. The Wall Street Journal has reported that Credit Suisse First Boston and Morgan Stanley will be the lead investment bankers for an IPO expected to raise as much as $25 billion. The stock will be sold by Google executive and employee insiders, and likely will be purchased by mutual funds, insurance companies, pension funds and other big, institutional investors in big, institutional blocks of stock.

If history is any guide, there will be nothing left over from the IPO for small investors.

"The Google IPO is the most anticipated IPO in a long time," said Jeffrey Hirschkorn, co-founder and principal IPO analyst with Current Offerings Inc. "It could be the biggest tech IPO ever. It could be a breakthrough, because it could open up a flood of tech deals. A lot of people are waiting on the sidelines for Google to come out."

What's in it for the average investor?

Depends who you ask.

A trading consultant at Charles Schwab, the discount brokerage, said, "We don't have the Google IPO listed yet. If we did, you'd have to be one of the most active traders to get it. Those are people who have quite a bit of money."

Mitch Zacks, vice president of research at Chicago-based Zacks Investment Management and a Chicago Sun-Times columnist, said institutional investors and corporate executives with whom investment bankers are trying to curry favor traditionally have had first dibs on major IPOs, which can double investors' money in a day's trading.

"Investment bankers are going to make shares available to high-powered individuals," Zacks said. "Mom-and-pop investors don't contribute enough money to the investment bankers to participate. If there is going to be a 100 percent return on an investment, the bankers will save the opportunity for those they want to build relationships with."

But mom and pop may have a crack at Google shares through another channel.

Google this: A Google search indicated that the Silicon Valley rumor mill is talking about the possibility that Google would make shares available through a regular IPO combined with an online auction.

Hirschkorn said: "You can be damn sure that average investors are going to get stock. It's going to be heart-warming, because mom and pop will have a chance to own 100 shares of Google."

He said the public likely will have a shot at Google's shares through an auction run by W.R. Hambrecht, which aims for a level selling field. He said consumers can open a Hambrecht account for just a $2,000 investment.

Google can decide how it wants its shares distributed, and Hirschkorn said there would be a big public relations win for Google if it made it possible for hundreds of thousands of people to own its shares.

Besides, he said, Google would want to steer clear of past abuses, in which bankers in effect bribed corporate officers with shares from hot IPOs and in return expected to secure investment-banking business from their firms.

Investors would benefit through an auction from the bump in the share price from the IPO price to when it trades the next morning on the stock exchange. But Zacks said an auction mainly would benefit Google, which would pocket most of the gain from the first-day sale as investors bid up the price.

Zacks, author of Ahead of the Market, a book on using investment research, said investors shouldn't feel bad if they miss out on a Google IPO.

"Statistically, IPOs do not perform well over time," he said.

To express his view on IPO investments, Zacks quoted Marx -- Groucho Marx -- who said he would never belong to a club that would have him as a member.

Warned Zacks, "Traditionally, the only IPOs small investors could get in on were the ones that were going to fail, because there was not enough institutional demand for shares."