Thoughts on the Google IPO

Thoughts from WSJ's Holeman Jenkins on the Google IPO. Excerpt:

Google's IPO unquestionably represents an improvement on Wall Street tradition. The apportionment of shares was designed to be mechanistic (or so Google assures us) and not ridden with cronyism, as traditional IPOs are. Founders Sergey Brin and Larry Page deserve a round of huzzahs (which we duly bestow).

One less gratifying lesson is that what's true after a company goes public is also true before: Investors take a hard look at management in judging a firm's value. The whole pith and moment of modern financial theory concerns the problem of trust between shareholders and management. Yet here was Google inviting investors to trust the company with $1.67 billion of their cash even as the company professed it had no need for cash and never bothered to explain how it would be deployed to produce a competitive return for shareholders.

More eyebrow-raising, Messrs. Brin and Page expressed little enthusiasm for having the Joe Public as a partner. They made it clear they were going along with an IPO mainly as a "liquidity event" so employees could cash out their stock options.

Worse still, they wrote this condescension into the company's bylaws, awarding themselves special voting rights that virtually guarantee that when their interests diverge from those of outside shareholders, outside shareholders will be the ones taking it on the chin. (Maybe that's why $135 was a nonstarter.)