According to TheStreet.com:
The enormously successful Google recently indicated that it hoped to go public sometime early next year. People familiar with the talks said the IPO could be worth between $15 billion and $25 billion, making it one of the biggest in history, with a 10% to 15% stake in the company up for sale.
Okay, if 10%-15% of Google is worth between $15-$25 billion, that makes the market cap range anywhere from $100-$250 billion.
Riiiiiight.
According to my figures, Microsoft is worth $283 billion today. And they don't even have $100 billion in the bank, so they'd have to bust out some serious stock to buy Google if they think that's a reasonable valuation.
Does anyone else get the feeling that the mini-bubble is inflating more and more?
It's funny, in a way. Imagine how much Microsoft would be paying for a whole bunch of Linux machines.
Heh.
Posted by jzawodn at October 31, 2003 07:49 AM
Well, I understand that probably $15 to $25 million is the whole company value (market capitalization), not justt the value of the 10%.
And anyway... Google es more than a farm of Linux boxes ;-) (i.e. ad sales, patents and many others)
The article doesn't make it clear at all, does it? If the IPO is "worth" X dollars, and it represents Y percent of the company, then...?
Then again, this is TheStreet.com we're talking about.
As for the Linux issue, of course it is. But that doesn't change the fact that the physical assets Microsoft would be buying are largely Linux machines. :-)
If they go public I'll def. be one of the many people there buying stock the first day. Why? Because its one of the easiest ways to make a few bucks off of a stock...buy their IPO. No matter what its gonna go up the first day unless they're truely a terrible company/product.
I am not sure about the valuation. From the articles I've read, either the IPO is going to be worth around 20B (like your article says), or the company is going to be worth 20B (here). In any case, the valuation is definitely bubbular. From that article I linked, they'll only earn 200M this year. If we go with the low end of the valuation at 20B, that's a 100 Price to Earnings ratio (20b / 200m). The P/E grows to freaking 1000 if the company is valued at 200B like you mentioned, Jeremy. Great company and all, but a little too rich for my blood.
Good catch Jeremy... They really didn't understand things.
The NY Times has it pretty simply:
"The company is considering selling about a 10 to 15 percent stake to the public, which is expected to raise more than $2 billion to be used to invest in the business and generate wealth for its employees, venture capitalists and early investors."
The company is being valued between 15 and 25 billion. They will only sell 10 - 15 percent of their company... thus raising ~$2billion.
RE Chris's comment about "def... buying stock the first day...one of the easiest ways to make a few bucks off of a stock...buy their IPO"... One of the hardest things to do is receive an allotment of shares from an investment bank. This is the way make free money. Buying the shares on the open market, post-IPO, is not a great way to make free money. The people who received allotments are then looking to sell (cash out their free money) to people like you....
In other news, Yahoo has stolen yet another idea from Google - product search (Froogle).
These "market capitalization" values are meaningless when the float is so small. If you made up a graph of "price" -vs- "number of shares
that would be bought". It starts off with a very high price and only a few buyers, but as the price drops there are more people interested in owning the company.
The trick (for the company and/or investment bankers) is to find the right % of the company to offer that maximizes the dollar value of the IPO (I think this is an "area under the curve" problem), presuming that you can only sell the shares at the *lowest* price reflected in the area of interest.
"15% of the company is worth $X" cannot be extrapolated to what 100% of the company might be worth.
"Larry":
Say what?
Yahoo Shopping has been offering product search for years before Google's product search. What planet are you on?
15 Billion, I think that's a fair value of Google, because Google is not only a search-engine, it's a brand, too.
This article (Sydney Herald) clarifies that the estimated value is $15-$25 billion and so the IPO (~10%) is for ~$2 billion.
Microsoft, btw, if out of Google's adquisition according to the story.
Steve Friedl's comments are completely right in that the value of a company (market cap) can't be extrapolated from of the value of a 10% (or how much people paid for that 10% on a IPO). However, that's how in the stock market the 'market cap' or value of a company is calculated (!) In fact, many of today's NASDAQ companies are still listed with only 10-20% of the shares as public ('float'). (YHOO or EBAY float, on the other hand, is ~90%, AMZN about 55%. AAPL -Apple Computer- more like 99%).
That effect was one of the main reasons of hot-IPOs and the Internet buble in general ('let the people fight over 5 or 10% of the company and send the value to the sky, as is the other 90-95% where worth the same).
This is so '99s...
It's funny, in a way. Imagine how much Microsoft would be paying for a whole bunch of Linux machines.
It's even funnier if you consider how much they would pay for those Linux machines, and then how much they would pay to convert them to Window like they did with Hotmail. Not to mention the costs of adding more machines so Google would be as fast as the previous Linux version.
