Stock auction didn't work as predicted

The dot-com's IPO raised $1.67 billion in its first day of trading.
SAN JOSE, Calif. (AP) -- In a debut vaguely reminiscent of the heady days of the dot-com boom, shares of Google Inc. surged in their first day of public trading Thursday as investors who avoided the company's auction-based offering readily jumped into the familiar territory of the stock market.
Though the 18 percent jump boosted the paper worth of Google shareholders and insiders, it also was a sign of failure for the unorthodox auction designed to gauge true demand and set a rational price that wouldn't be subject to big swings.
"It seemed like the whole purpose of the auction was to prevent that kind of big move from happening," said Barry Randall, portfolio manager for the First American Technology Fund. "If it's not a failure, it clearly didn't work the way Google's management intended it."
Rising stocks
Google shares finished the day at $100.34 with more than 22 million shares having changed hands, making it among the 10 most active issues on the Nasdaq Stock Market. The closing price was $15.34 higher than the final IPO price set by the auction but still lower than the $108 bottom of the company's initial range.
The stock's rise isn't likely to generate many complaints at Google, underwriters or anyone else holding the appreciating stock. But it's a letdown for the company, which only profits from the 14 million initial shares it sold at $85 each.
In the end, the IPO raised $1.67 billion. If the stock had priced at the high end of the original estimate, at $135 apiece, the offering would have raised as much as $3.6 billion.
Google declined to comment. Its so-called quiet period extends for another 25 days, said spokeswoman Cindy McCaffrey. Still, in true dot-com fashion, the company was planning an IPO party Friday at its Mountain View headquarters.
The offering made co-founders Sergey Brin and Larry Page billionaires -- at least on paper. From share sales in the IPO, Page collected $41.1 million and Brin got $40.9 million, but that pales in comparison to the more than $3 billion each still holds in Google shares.
Employees who bought stock on the cheap or were granted options also stand to profit handsomely. Within the next 180 days, they will be allowed to sell shares and pocket real cash.
Google's IPO price was set Wednesday after the close of an unusual auction in which would-be investors bid how much they thought the search engine to be worth. All winning bidders paid the same price -- one that guaranteed the sale of all 19.6 million shares.
Intentions
Though the so-called Dutch auction was designed to open the IPO beyond large investors who typically get first access to new stock issues, that's not what actually happened, said David Garrity, a technology analyst in New York with Caris & amp; Co.
"It was supposed to democratize the process and let people buy in at just a few shares, but it was a miserable failure because the organizers didn't realize the securities regulations that require people who bid to have a certain net worth," he said.
Now, Google is publicly traded in a familiar forum, the Nasdaq Stock Market.
Still, most analysts expect Google's stock price to be volatile, both because of missteps leading up to the IPO and its executives' statements on how they run the company.
Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.