Google's IPO silence frustrating investors
siliconvalley.com
Posted on Thu, Jul. 08, 2004
By Deborah Lohse and Michael Bazeley
Mercury News
Google's plan to sell stock to the public may be Silicon Valley's hottest party of the summer, but just try wrangling an invitation -- or even finding out when or where it's going to happen.
So far, would-be investors -- and even Wall Street pros -- are finding that no one can tell them how shares in Google will be offered for sale, how much they will cost or even how to get in line for the hottest deal in decades.
``The silence is deafening,'' said Kevin Landis, chief investment officer of Firsthand Capital Management in San Jose.
Part of the frustration is that Google, the Internet search company in Mountain View, is in a ``quiet period'' required by the Securities and Exchange Commission. That prohibits executive insiders from discussing the company beyond the information disclosed in financial documents.
But Google, which is notoriously secretive anyway, is taking its quiet period to extremes, some say. It has threatened to fire employees if they talk to the press and discouraged its investment-banking partners from giving even general information to investors about initial public offerings of stock or the auction process that Google intends to use to sell its shares.
One brokerage house wanted to post a simple educational primer on its Web site to help educate novice investors with basic facts on stock deals called IPOs, for initial public offerings of stock. But the brokerage's own in-house lawyers worried that would be violating the strict gag order coming down from Google.
Instructions `missing'
That kind of silence is making many investors fear they'll lose their shot at buying shares in the Google IPO because they didn't learn what to do in time to participate.
``What's missing in all of this is instructions: A, call this brokerage firm, B, do this,'' said Charles Klepadlo, a campus minister from Baltimore who wants to bid in the auction. ``If I'm just a person who makes $20,000 to $60,000 a year, what do I do exactly to get my best chance?''
Investors like Klepadlo see the Google IPO as a rare chance to get in as ground-floor investors in a company used daily by millions of computer surfers to navigate the Internet. Some might be imagining -- probably mistakenly -- that once Google starts trading it will be a get-rich-quick story, like Netscape, VA Linux, or other tech-bubble IPOs. But others hope simply for slow-but-steady growth and applaud Google for opening the once-hallowed IPO-investing process to the small-fry users that put Google on top.
Google announced its widely anticipated IPO in April. It got a lot of attention by saying it would disburse company stock through an unusual ``Dutch auction'' process that will let investors large and small bid for as few as five shares apiece, generally awarding shares to the highest bidders.
Google also announced that 30 brokerage firms, from E*Trade and Ameritrade to Goldman Sachs and Morgan Stanley, will offer their customers access to the deal.
But beyond that, the company has been maddeningly mum about how the process will work. Will customers of certain firms stand a better chance of getting shares than others? Do investors need to have IPO experience or hold a brokerage account for some period of time before they can bid on the Google IPO? Do they have to have a certain amount of money to open an account in the first place?
Even brokerages that cater to small investors aren't answering those questions yet.
Details uncertain
Schwab, one of the largest discount brokerages, will only tell customers that ``it's our expectation that we would participate.'' Schwab customers could have their Google bids handled by a partner firm, Epoch Securities, said Glen Mathison, a spokesman for San Francisco-based Schwab. But will the deal be open only to Schwab's wealthier customers, as in past IPOs with Epoch? Schwab can't say.
E*Trade, based in New York, is a bit more forthcoming. Executives say they can't discuss Google, but they are telling customers that investors in previous IPOs needed only to open an account with $1,000 and understand the risks involved.
Professional investors aren't as worried about losing out, but they aren't getting much more information, either.
``I would have anticipated at least a conference call that would have advised institutions on how the mechanics will work,' said Marianne Wolk, an analyst for Susquehanna Financial Group. ``And we have not had that call.''
But Wolk said the Google IPO is unusually complex because of the auction and the deal's size, which could be slowing down the process and the flow of information.
Still, it's not as if Google has ever liked to talk to much about what it's doing. During its short history, Google has closely guarded the most mundane facts, such as the number of employees, from industry analysts who normally would get access to information in exchange for signing secrecy agreements.
``They are notorious -- they just don't tell you anything,'' says Jupiter senior analyst Gary Stein.
One bit of information about the deal that seems to have leaked out of the Google lockbox: The 30 participating brokerages plan to start testing this week whether their computers will work for the unusual auction, according to Dow Jones Newswires. A big test of the system is slated for July 16.
If the test is successful, Google may then take the next step to the IPO -- a marketing ``road show'' to large investors. At that point, the 30 brokerages should be able to explain the process to their customers, experts say.
In addition, auction experts predict the company will create an Internet-based road show that investors can watch to learn more about Google's business and its deal.
Bidder handbook
Google has also said it will offer prospective investors a bidder handbook describing how to make an offer.
Klepadlo will certainly be ready to jump in. ``It seems like a good opportunity to make some good, honest money,'' he said. |
