Google Essay Example | Topics and Well Written Essays - 1000 words - 1

Google - Essay ExampleThis app balance between the offer toll and the receptive damage is much greater than the increase for typical initial public offerings in 2004. Indeed, 82 percent of the IPOs issued in 2004 experienced less of a jump from the offer bell to the open price than Google did, and the statistics were similar for IPOs issued prior to Googles debut and following Googles debut.The enormous post- auction sale price increase of Google, especially in the immediate weeks and months following its debut, when there were few substantive news releases on changes in company system and fundamentals, further suggests that the online auction method may not have priced Google efficiently. Google subsequently soared in the following months to a high of $317.80 on July 21, 2005. As of June 29, 2005, Google had exhibited price appreciation of 186.8 percent, relative to its open price.Critics of Googles IPO initially argued that the auction was a failure because Google slashed th e number of shares that it would sell at public auction from 25.7 trillion to 19.6 million shares. Also, it dropped the target price range from the $108-to-$135 range projected in late July to the $85-to-$95 price range (Knight Ridder, August 19, 2004). At the conviction, many analysts suggested that the earlier Google price range had been overpriced yet, Googles closing price reached the lower end of that price range after 18 days of trading and reached the higher end of that price range after 32 days of trading. The lessening interest in Google at the time that it reduced the price range during the summer was possibly due to some combination of the following factors- The deprivation of information provided by the company during the process about its uses of capital - A slump in price appreciation for June IPOs- Reservations on the part of investors about the use of the online process.Who benefited from Googles price appreciation Under the traditional process, the favored clie nts of the underwriting investment banks can benefit from the initial IPO underpricing and subsequent price appreciation since they have the initial allocations. In the case of Google, the beneficiaries in the price appreciation have been 1. those investors who bought Google when it first began trading and held it until the price change magnitude substantially and2. the Google co-founders and the chief executive, as well as the venture capital firm involved in financing Google, who were allocated shares early in the process, but who could not sell them until the lock-up period expired. Google announced in its IPO prospectus that it wouldnt provide traditional earnings guidance. While it took this stance to avoid short-term thinking, the move too likely left Googles directors knowing more about company prospects than other investors. The third quarter, which Google was in at the time, proved to be one of spectacular growth. (Delaney, September 2005) By July 2005, the CEO Eric Schmi dt and the company founders Sergey Brin and Larry Page had change $1.7 billion in stock, other executives had sold more than $800 million in stock, and no open securities industry purchases had been recorded. Indeed, Page and Brin have sold 3.7 million and 3.8 million shares, respectively, or roughly 400,000 shares per month, while Schmidt had sold 1.3 million