Google’s Ipo

So, Google’s IPO looks interesting. The main WSJ article (subscription required) on the IPO highlights two things of interest.

First: the distribution of the shares via a uniform price Dutch auction. They’re going to have investors submit bids, where the bid includes the number of shares desired and the price. Aggregating all bid curves creates a demand curve; where the total number of shares demanded crosses the number on offer (I think it’s a completely inelastic supply) will determine the share price. With many bidders and a single supplier of a fixed supply, this should run prices up. But, as the article notes, this design does circumvent the usual first dibs to prestigious clients of investment banks. So high prices, but perhaps more distributed ownership?

Second, Google management will not be providing quarterly earnings guidance to investment banks. I think this is a good thing. I tend to agree with an idea attributed to Henry Manne, that quarterly 10-Qs and earnings guidance enhance the short-term tendency of management and increase the incentives for mischief such as we saw with Enron and Tyco. The quote from the IPO document is on point:

We are not able to predict our business within a narrow range for each quarter. A management team distracted by a series of short-term targets is as pointless as a dieter stepping on the scale every half an hour.