Google IPO
By Bob
A CBS MarketWatch article points out the weariness that fund managers have about the Google IPO. Much of it sounds like snivelling that they have lost their advantage over retail investors:
They don't like the sounds of getting in at a price they can't make money off of. They fear the price they'd be receiving isn't much of a discount than what retail buyers would get.It's akin to bypassing the high mark-ups you'd get from Pottery Barn, Saks or any retail outlet for that matter. Where's the value for such middlemen retailers? If Google were a new brand of wildly popular jeans sold at the same price to both consumers and retailers, then retailers might opt to buy cheaper imitations or jean jackets they can offload to consumers at higher prices.
In like vein, fund managers are finding alternative investments to play the positive sentiment surrounding the IPO.
To be sure, some fund managers expect the Google IPO to be the top of the Internet market. They'd look to short most Net shares. But I would argue that Google planned its IPO well.
I would say that Google planned its IPO well to extract as much money out of the market as possible. Initial trading of the stock is likely to be down which is contrary to how most internet stocks traded in the late nineties. The reason is simple; who is left to buy at that price? If the hesitency of fund managers to participate is widespread, it is conceivable that it may open lower than expected and institutions may jump in at that point. I think that's unlikely to happen and that individuals are likely to bid up the IPO price. There is something in the market called 'natural selling' which means that there is always somebody out there holding a stock who needs to paint the garage or pay for their daughters wedding. This phenomenom is why in slow markets, it seams stocks like to drift down. I find this much more common in smaller stocks who don't have much coverage. So, if you're planning to participate, I recommend a low ball bid.
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