Google may have set much of cyberspace back on its heels when it decided to prepare for an initial public stock offering, but skepticism has now begun to emerge over the question of whether the Google offering is especially unwise for investors as it’s now laid out.
"Sure, IPOs are inherently risky, but Google stock may be especially unwise at this nosebleed price range," said Business Week in one analysis of the Google plan. "At the midpoint price, Google's would-be $33 billion valuation is a step down from its closest competitor, Yahoo, a seasoned Internet giant with a diverse revenue stream and a market value of $40 billion.”
The magazine said that, when comparing projected 2005 earnings against those valuations, Google is “just a speck below” Yahoo, which the magazine said is troublesome because Google “is largely a one-trick pony, with no easy means to diversify its business and hefty management challenges.” The magazine quoted what it called “a skeptical Google investor” as saying he planned to sell after the IPO, while longterm investors should think twice about Google’s “single-barrel business model” against the “expected decline of the search market overall.”
Business Week isn’t alone reporting such skepticism. USA Today said Google’s “steep per-share price range” makes some investors skittish. “[S]ome pros are planning to bid below that,” the newspaper said. “If they get some, great; if not, oh well. Others are blowing it off, figuring they’ll let others get caught up in the hype and later buy the shares for less.”
The New York Post said the Google IPO plan – giving small investors a piece by way of an auction process for Google shares – “could end up backfiring on mom and pop investors” because its big valuation could leave Google stock with “nowhere to go but down in the aftermarket.”
These musings appeared within the days following Google opening the Website where prospective investors should register if they want to bid on Google shares. That site opened July 30, at the end of a week in which Google estimated its stock would go for between $108 and $135 a share, setting the company value between $29-36 billion.
