Big mistake. When Google’s top executives found out that Paulsen was trying sneak behind their back and finagle Goldman’s way into the IPO, they went “apeshit,” as Charlie Gasparino reported in the May 10, 2004, issue of Newsweek. Thanks to Paulsen’s blunder, Google immediately cut Goldman out of the IPO, costing the bank over $130 million in fees — fees that Goldman thought it was entitled to as the premier underwriter of hot tech issues to that point.

This anecdote is instructive because it is just one of many examples of the contrast between how Google went public in 2004, and how Facebook is conducting itself now, ahead of a widely expected IPO in 2012. Facebook seems intent on not following Google’s path, and in fact, taking an almost-diametrical approach.

Far from shunning sweetheart deals, Facebook has enthusiastically embraced them, as evidenced by the $1.5 billion private placement for the super-rich that the social networking website has granted to none other than Goldman Sachs.

As for Goldman, it’s almost as if the platinum-plated megabank is determined not to get cut out again, and so it’s cooked up a scheme to earn hundreds of millions of dollars in fees, all while lavishing Facebook shares on its wealthiest clients, a full 18 months before the likely IPO.

Google’s Dutch auction–style IPO was designed to put regular investors on the same footing as the richest bankers at the top Wall Street firms. It didn’t matter if you had $100 to invest or $1 million. All investors were treated equally.

A Dutch auction is much more open than a traditional Wall Street IPO, in which favored hedge funds and bankers receive chunks of stock on favorable terms. In Google’s IPO, anyone could make a bid, and then the auctioneer worked down from the top until all of the shares were allocated. The final bid accepted become the offering price: $85.

Google shares closed at $616.44 Friday. The stock has never split.

Continue reading …

Pages: 1 2 View All

Authors: Sam Gustin

to know more click here