washingtonpost.com  > Technology > Special Reports > Google

Quick Quotes

Because of, Or Despite, News, Bids Placed in IPO

By Ben White and Terence O'Hara
Washington Post Staff Writers
Saturday, August 14, 2004; Page E01

Umesh Patel, a 36-year old software engineer from California, debated until the last minute.

Patel said he followed every scrap of news surrounding the much-hyped auction that began yesterday morning to sell initial public shares in the Internet search firm Google Inc.

_____Google In The News_____
Tactics of 'Google Guys' Test IPO Law's Limits (The Washington Post, Aug 17, 2004)
Auction for Shares In Google's IPO Could End Today (The Washington Post, Aug 17, 2004)
Google Launches Auction (The Washington Post, Aug 14, 2004)
Complete Coverage: Google
_____Free E-mail Newsletters_____
• TechNews Daily Report
• Tech Policy/Security Weekly
• Personal Tech
• News Headlines
• News Alert

Much of that news turned negative in the past week, as Google faced legal questions, including whether an interview company founders gave Playboy magazine violated federal securities laws against company insiders touting their initial public offering.

But when bidding began yesterday, Patel decided to pull the trigger.

After all, he thought, Google dominates the search engine world. And it makes money. Even if the share price range of $108 to $135 seemed high compared with Google's earnings, Patel said, he thought the future for the firm looked bright.

Patel placed two bids, one for 50 shares at $135 each through E-Trade Financial and one for 100 shares at $126 each through online broker Harrisdirect LLC. Both firms are among the 28 brokerages conducting the auction for Google shares.

Patel said he was confident he would get shares at the higher price and thought he might get a bargain at the lower price. He said the bidding process went smoothly.

"I was thinking about it for the last two weeks, keeping my eyes on it," Patel said yesterday. "This morning I thought, this is a good company, it has a unique product. I think the stock will go higher. And if it goes a lot higher, I will sell it."

Attorney Lawrence W. Plitch, meanwhile, said he just wanted to relive the glories of the late 1990s, when technology stocks shot through the roof and showered riches on anyone lucky enough to receive IPO shares and sell them before the market began to crash in early 2000.

"It starts with the fact that I love the search engine," Plitch said from his office in Wellesley, Mass. "And I'm a little nostalgic for the go-go 1990s. I'm hoping this market starts getting a little irrational exuberance in it. . . . This thing has some sizzle, and it's fun to be a part of it."

Plitch bid $126 a share for 100 shares of Google through Fidelity Investments. He thought about going to the top of the range, but decided that was too much money. At $126 a share, he thought he might beat out bidders at $125. He said he hoped that his bid would be successful and that he ultimately would make money. But mostly he just wants to have fun.

Just how many individuals and institutions bid yesterday, and at what prices, was impossible to say. The company released no information on demand for its IPO shares. And the brokerage firms conducting the auction uniformly declined to comment, citing both Google's desire for secrecy and securities laws.

Anecdotal reports from big Wall Street firms not involved in the offering and smaller investment advisory firms indicated some investors were taking a pass. Calls to seven Washington area investment and financial advisors yesterday yielded none whose clients had indicated interest in Google IPO shares. "No one has brought it up," said Bill Brennan of Capital Management Group in the District.

L. Edward O'Hara Jr. of Capital Asset Management Services in Silver Spring said none of his clients had asked about the advisability of the investment. "We tend to be much more conservative than that," he said.

A broker at the downtown D.C. office of one brokerage, who spoke only on condition that his name and firm not be identified because he was not permitted to speak to the media about the offering, said several clients had called inquiring about it and expressing confusion about how to buy.

Executives at several big Wall Street firms said their institutional clients were staying away from the offering, waiting to see how the stock trades on the open market. "We are not seeing a lot of interest," said one Wall Street executive who did not bid on Google shares. "This thing could drop like a stone in the aftermarket."

But grumbling from big brokerage firms was expected because Google is attempting to loosen the stranglehold Wall Street has long had on the IPO process.

Some on Wall Street said yesterday that taking part in the Google offering was more trouble than it was worth. But for online brokers such as E-Trade, Ameritrade Inc. and Schwab.com, it had its attractions.

"The reason to be an underwriter in this deal is for marketing value," said Philip J. Facchina, senior managing director and head of technology, media and telecommunications investment banking at Friedman, Billings, Ramsey & Co. in Arlington.

Google is expected to set the sale price next week, based on the results of the auction. The stock will begin trading after all shares are allocated to winning bidders.

To take part in the auction, investors were required to sign up for brokerage accounts at one of the 28 underwriting firms. They also had to apply for a bidder identification number from a Web site set up by Google.

The brokerage firms required investors to fill out questionnaires indicating their liquid assets, investment knowledge and tolerance for risk. Federal law forbids brokers from placing unsophisticated customers, or those without enough resources to sustain losses, in risky investments.

Google acknowledged in filings with the Securities and Exchange Commission that its shares are risky and could drop when they start trading on the open market. If they do, successful bidders in the auction will start out with a loss.

Criteria for taking part in the auction varied dramatically from one brokerage firm to another. Big Wall Street investment houses that cater to institutions and wealthy individuals tended to have higher hurdles to clear.

Credit Suisse First Boston, for instance, requires investors to have about $5 million in assets to open a brokerage account. The brokerage arm of Citigroup Inc., requires about $1 million in assets. Online brokerage firms catering to individual investors had somewhat less stringent requirements, though they also required significant assets to take part in the Google bidding.

A spokesman for Fidelity Investments, for instance, said clients had to have $100,000 in assets in an account with the firm or to have made at least 36 trades in the past 12 months to qualify.

Staff researcher Richard Drezen contributed to this report.


© 2004 The Washington Post Company