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Google Not The First To Go Dutch

In the flower market, the process takes seconds. The bond market, which uses a similar system to sell new Treasury bonds, moves hundreds of millions of bonds in a matter of minutes. Google's IPO took much longer because the company wanted to open the bidding to individual investors who rarely get in on hot IPOs because investment bankers allocate many of the shares to their favored clients.

Creating a computer system to handle tens of thousands of bids for as few as five shares proved far more difficult than organizing flower and bond auctions where a few bidders buy big lots.


Patrick Byrne, chief executive of Overstock.com, is a fan of the Dutch auction IPO process. His company used it to go public in 2002. (Overstock.com Via Prnewsfoto)

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Almost immediately, Wall Street whispered that the technology was doomed to fail. Too big a job, too little time, Wall Streeters said; Google would be better off going back to the old way of doing business -- letting investment bankers sell the stock to hedge funds, pension funds and other regular clients.

"That's when I smelled a skunk," said Patrick Byrne, chief executive of Overstock.com, one of the first companies to go public under the Hambrecht system in 2002. "It was an orchestrated campaign by the banks that just didn't want to see it succeed."

Overstock.com is based in Salt Lake City but has Washington roots. Byrne went to Walt Whitman High School in Bethesda when his father, Jack, was rescuing the Geico insurance companies from near-collapse back in the late 1970s. Jack Byrne is co-chairman of Overstock.com, which sells excess merchandise over the Internet.

Overstock's board members include Gordon S. Macklin, the former chairman of the National Association of Securities Dealers here, who is also on the boards of MedImmune Inc. and Martek Biosciences Corp.

Wall Street firms "had to be dragged into" participating in the Google stock offering, Byrne added. "From day one, I think they set out to sabotage it."

Byrne said investment bankers also were behind stories saying Google's presentations to big investors did not go well, that there was no institutional demand for Google shares and that the stock was likely to tank on the first day of trading as IPO investors bailed out.

The computerized system of signing up small investors and taking their bids worked fine and so did the offering. Google stock jumped from $85 a share to $100 on the first day of trading and closed Friday at $108.

"None of the bad things that were supposed to happen occurred," said Byrne, such an ardent advocate of the Dutch auction IPO process that he often sounds as if he's speaking on behalf of Google.


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