Google went public through an auction process. Small investors were on an equal footing with the big boys. They also had an opportunity to buy shares in the aftermarket before the stock price took off. GOOG's first day pop was only 18%, from $85 per share to $100.34. There were occasional trades below $100 as late as September 7.
However, when the underwriters exercised their over-allotment option, I suspect that those shares went to their favored customers.
It looks like someone had some advance knowledge about the P&G-Gillette deal:
nytimes.com
Heavy Trading in Gillette Call Options
By BLOOMBERG NEWS
Published: January 29, 2005
Trading in Gillette stock options that increase in value as the share price rises surged on Thursday, hours before Procter & Gamble agreed to buy the company for $57 billion.
Contracts enabling an investor to buy Gillette at $45 a share by Feb. 19 were the most active. About 4,200 of the so-called call options changed hands on Thursday, more than eight times the daily average this year.
"I'd be at a loss if there was no investigation," said Michael Schwartz, chief options strategist at Oppenheimer & Company.
Options convey the right, to buy or sell assets at a set date and price. Each stock-option contract controls 100 shares.
An investor who bought 1,000 of the February contracts stood to gain about $485,000 by selling them yesterday. The options, which cost $1.35 on Thursday, sold for $6.60 on the International Securities Exchange. At the high price of $6.80, an investor would have made $545,000.
Dan Charnas, a spokesman for the American Stock Exchange, the main market for the options, said, "This is just the kind of situation that the Amex would look into as a matter of course given its role as a regulator." |
