To market

August 22, 2004

THUMBING their noses at Wall Street, Google Inc.'s founders set out to take their company into world financial markets in their own way, via a rare Dutch auction promising to end the free money that big investment houses typically reap for their pals in the first days after such initial public offerings .

At first, Google's owners, 30-something wunderkinder who started in a garage just six years ago with a breakthrough idea for how to search the Internet for information, were hailed as financial pathfinders. More recently, they were panned as arrogant and unwise in the ways of offering publicly traded stock. Then, after months of speculation, $1.7 billion worth of stock was finally auctioned off last week, and there are widely varying analyses of what transpired.

Take your pick:

A) Shunned Wall Street poked back at Google, talking down its stock -- partially accounting for the lower than expected auction price of $85 a share. (In the beginning, Google sought to sell for at least $108.)

B) Investors who bought Google at auction still had the chance to flip the stock with a sizable windfall over its first two days of trading (of more than 25 percent, taking the stock to exactly $108). Just as investment houses likely could have done, Google appeared to set its auction price lower than it could have in order to prepare the stage for that big initial bump -- contrary to one of the company's stated purposes in holding the auction.

C) Google's path to market was marked at times by major missteps, but overall its offering was successful, particularly given the bear market these days for tech stocks. The IPO was the largest ever for an Internet company, which was accorded a market value more than that of General Motors.

D) All of the above.

Two trading days hardly tell the story, but the answer for now appears to be D.

What didn't happen is just as important: The stock -- and its first day's gains -- was initially available widely to the public, not narrowly and behind-the-scenes to investment houses' favored clients. Thus Google's initial gains were more widely shared.

Whether Google's price holds steady, thrives or dies is now a matter for the marketplace. Its main product -- "search" -- and its main business -- selling ads triggered by searches -- are subject to increasingly rapacious competition. The next big thing is always just around the corner, and it may be that investors have learned the need to be wary of Silicon Valley.

If Google's founders had gone to market the Wall Street way, there's now a decent argument that they and other company owners would have made a lot more money last week. But in setting their own terms for the IPO -- terms of distribution far more democratic than the Street's corrupt traditions -- and in succeeding in still raising a phenomenal sum for their stock, they have at least shown another path and provided a big service to the vast majority of investors.

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