Cramer: "Google Won't Break the IPO Fiasco Mold"
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Cramer: "Google Won't Break the IPO Fiasco Mold"
By James J. Cramer
RealMoney Columnist
01/08/2004 12:54 PM EST
"Memo to everyone involved in the underwriting process: Are you ready for Google? I bet you aren't.
Everybody wants 100 shares of Google, everyone. Heck, my kids want 100 shares of Google -- each!
But the underwriting system, which is so broken when it comes to high-demand deals, as demonstrated by the dot-com bubble, remains totally unfixed.
Do you have any faith that the pricing will be done right? Do you have any faith that the stock will open anywhere near where the deal is done?
Maybe, just maybe, we have cured spinning. Maybe, just maybe, we have cured laddering. I wouldn't be so sure.
But we certainly have not settled the process of an initial pricing, and then a price up and another price up and still another, where stock can't be issued to meet demand on the fly and the deal opens at a huge premium to the last price, leaving a giant amount of money on the table for Google. Nor have we solved the problem of the batched orders of the self-directed traders coming in and taking the darned stock up on a market orders.
In other words, fiasco awaits.
I saw this morning that WH Hambrecht cut its fees, and that the firm has some of the deal. But the leaders are Morgan Stanley and Goldman Sachs, and it is the same old, same old for them.
I was hoping that Google finally would break the mold and do the whole deal in eBay fashion, smashing the oligopoly of underwriters by doing the whole thing on the Web. There we could find an equilibrium price. There we could see how technology cuts the price of underwritings -- as it cuts the price of everything else it touches -- and gets the optimal price for all.
But Google backslid. It didn't revolutionize anything. It endorsed the cozy status quo.
Too bad.
Unless you are long Goldman, Morgan and the other big guys.
For them, it's a huge save, one that virtually assures them their big fees for many years to come. "
(in www.realmoney.com)
RealMoney Columnist
01/08/2004 12:54 PM EST
"Memo to everyone involved in the underwriting process: Are you ready for Google? I bet you aren't.
Everybody wants 100 shares of Google, everyone. Heck, my kids want 100 shares of Google -- each!
But the underwriting system, which is so broken when it comes to high-demand deals, as demonstrated by the dot-com bubble, remains totally unfixed.
Do you have any faith that the pricing will be done right? Do you have any faith that the stock will open anywhere near where the deal is done?
Maybe, just maybe, we have cured spinning. Maybe, just maybe, we have cured laddering. I wouldn't be so sure.
But we certainly have not settled the process of an initial pricing, and then a price up and another price up and still another, where stock can't be issued to meet demand on the fly and the deal opens at a huge premium to the last price, leaving a giant amount of money on the table for Google. Nor have we solved the problem of the batched orders of the self-directed traders coming in and taking the darned stock up on a market orders.
In other words, fiasco awaits.
I saw this morning that WH Hambrecht cut its fees, and that the firm has some of the deal. But the leaders are Morgan Stanley and Goldman Sachs, and it is the same old, same old for them.
I was hoping that Google finally would break the mold and do the whole deal in eBay fashion, smashing the oligopoly of underwriters by doing the whole thing on the Web. There we could find an equilibrium price. There we could see how technology cuts the price of underwritings -- as it cuts the price of everything else it touches -- and gets the optimal price for all.
But Google backslid. It didn't revolutionize anything. It endorsed the cozy status quo.
Too bad.
Unless you are long Goldman, Morgan and the other big guys.
For them, it's a huge save, one that virtually assures them their big fees for many years to come. "
(in www.realmoney.com)
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