Revisiting Google Inc (GOOGL)’s IPO After 10 Years

Exactly a decade ago Google Inc (NASDAQ:GOOGL) conducted its initial public offering (IPO) and went public. At that time and even now, the ‘Dutch Auction’ model that Google Inc (NASDAQ:GOOGL) used for its offering is considered rather unconventional. The man behind Google Inc (NASDAQ:GOOGL) ‘s IPO,  Bill Hambrecht, Co-founder and Chairman of WR Hambrecht, discussed the ‘Dutch Auction’ model and Google Inc (NASDAQ:GOOGL) ‘s IPO on CNBC recently.

“After the Google Inc (NASDAQ:GOOGL) offering, we did a number of offerings […] Morningstar, Interactive Brokers Group,  some really good ones on our own and after the Interactive Broker Group, the bold firms came to us and said “OK, enough is enough, we will work with you and we will use the auctions.”  It just didn’t work, because they just don’t want to use the auction, they don’t want to give up the ability to allocate shares to their best clients and most important they don’t want to give up the ability to discount the price,” Hambrecht said.

Hambrecht clarified that the problem is with the banks who don’t want to use the Dutch auction models and not with the model per se. According to him, the model is still very viable and his firm has re-entered the IPO market, doing smaller deals where they are not competing with the big firms and in the end the Dutch auction model will have its own successes. At the time of Google Inc (NASDAQ:GOOGL)’s IPO most of the people believed that at $85 a share, the company was overvalued, though they were all proved wrong as the stock debuted at that price and within a year was trading at more than double of that price. Hambrecht revealed that some of the banks that were originally meant to do the IPO had priced Google Inc (NASDAQ:GOOGL)’s shares at $60 to $70 for the offering.

Disclosure: None