Wednesday, June 22, 2005

Cramer on Google, July 2004

Editor's note: Google has risen nearly 200% since this article was written.


RealMoney by TheStreet.com
How Google Has Ruined Its IPO Deal
Tuesday July 27, 2004 8:58 am ET
By James J. Cramer, RealMoney.com Columnist

Someone has to say it, might as well be me: If you wanted to do everything you could to kill the Google deal, if you wanted to do everything you could to be sure that you generated the worst deal ever, you would do exactly what Google's done. Let me count the ways.

First, you buck the system, which had finally gotten a lot of the kinks out of it, and make sure that the thing's done Dutch. I know the bonds are used to Dutch auctions, but the unsophisticated public sure isn't. Start the Dutch revolution without me.

Second, you set the price at a level that is the most forbidding to the most people: north of $100. What the heck does that prove? That you intend to be the next Berkshire Hathaway?

Third, you talk about shareholder democracy but then you do the single most anti-democratic thing possible: issue two classes of stock.

Fourth, you wait until the dog days of summer to do the deal when no one's around anyway.

Fifth, you show total contempt for all of the institutions that, like it or not, represent most of the buyers out there, especially now that you price the deal at $100 a share.

Look, I know the process from 1998-2000 was deeply flawed. There was spinning going on, and friends and family and lots of laddering and all sorts of evil that since has been erased or silenced. The main flaw with the system, though, was that you couldn't reset demand on the fly to make it so that there was some sort of elasticity when buyers came in. The underwriters always blamed the SEC for that. If that was the real problem, let's deal with it. But this deal, I mean, can you say fiasco?

In six months, Google's gone from a company everyone wants a share of to perhaps the single-most scorned entity I can recall. Right out of the chute! Amazing.

I repeat: What a fiasco! What a blown opportunity. What a shot-in-the-foot moronic way to go about ruining what could have been a definite shot in the arm for this horrid market.

There. Now I feel better.

7 comments:

Allan said...

"In six months, Google's gone from a company everyone wants a share of to perhaps the single-most scorned entity I can recall. Right out of the chute! Amazing."

I thought this statement by Cramer needed repeating. Again, ask yourself, what does Jim Cramer have to do with making money in the stock market?

A

Allan said...

And this quote from Jim Cramer, as reported in "Trading With the Enemy" an expose of Cramer written by one of his former employees (see archives for more on this book):

"At the end of the day, Jim called me over to talk and actually asked me to take a seat.

"IPO's are the way brokerage houses pay back their customers," Jim explained. "Their investment banking divisions make money underwriting the deal, we make money when it opens at a premium, and the only people fucked are the idiots who hold on longer then the initial print. Your job, he added, "will be to act as if you love these pieces of shit."

A

Harry vB said...

Allan,

Thought you might enjoy this little piece from yesterday's FT:-

Hot streak
Published: June 23 2005 03:00 | Last updated: June 23 2005 03:00

Bill Miller does it again . . . andagain, and again, and again, and . . . oh,never mind. Miller, the star Legg Mason fund manager famed for beating the Standard & Poor's index for 14 years in a row, was lagging the index late last year when he startled his peers by plunging into the Google initial public offering in a big way.

When word got out that Miller had bid for a good chunk of the available stock at more than $100 a share, some saw it as a desperate gamble. At best, it was thought a rather unusual move for a value manager, whose ranks are more commonly found scavenging for under-priced utilities.

Undeterred, Miller, an ├╝ber-nerd who appeared to be among the few people capable of bonding with the somewhat uncommunicative Google founders and their approach to valuation, was overjoyed when the price was cut to $85.

He ended up with 13 per cent of the company's stock, and now who's laughing? Miller hardly ever buys new stocks but certainly knows how to pick them - his previous internet bets included eBay and Amazon.com.

As the Google share price hovers near $300, he looks set for another record-beating year.

Anonymous said...

Jim was also reccomending a buy of GOOGLE multiple times betweeen 180-250 and he still is.

Allan said...

Jim was also reccomending a buy of GOOGLE multiple times betweeen 180-250 and he still is.

Yes and I give him credit for being bullish on Google now, anyway.

A

David M Gordon / The Deipnosophist said...

Hi, Allan,

I believe you will appreciate this commentary... < http://www.cxoadvisory.com/blog/reviews/blog6-29-05/ >

Allan said...

David, thanks for posting the link....I had read the article earlier this morning, thought about posting it here myself, but didn't want to risk labeling my blog a "bash cramer blog"...although he seems to attract a lot of bloggers, both pro and con.

A