Hey, Google: How High Is Too High?

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A typical initial public offering (IPO) will have a price range of, say, $12 to $14. Or, if the offering is red-hot, it could be $22 to $24.

Google need not be restrained by such limiting traditions. Rather, it decided to set its price range in the triple digits: $108 to $135. Based on its current share count, that's a valuation range of $29 billion to $36 billion. That's Yahoo! (Nasdaq: YHOO) country.

Some pundits say that the high stock price may scare away retail investors. Well, whenever there is a mania, no stock price is too high. After all, in the late 1990s, investors had no mental hang-ups when paying more than $200 per share for stocks such as, well, Yahoo!

A company with a $100-plus stock price is unusual in technology. In fact, it has become much more common to see tech stocks at lower prices. Even marquee tech giants, such as Intel (Nasdaq: INTC) or Microsoft (Nasdaq: MSFT), are in the $20 zone.

In fact, a triple-digit stock usually has a dividend payment attached. Perhaps Google may go against conventional wisdom and declare a dividend?

One thing that is traditional about the Google IPO, though, is the float. The float is the number of shares freely tradable on an exchange.

In an IPO, the float is usually small. This means it is easier for investors to push the stock up or down. Look at the recent IPO of Salesforce.com (NYSE: CRM). The stock price has been a virtual roller coaster.

With the expected large valuation of Google, the float is relatively small: 24.6 million shares. Combine this with the emerging power of hedge funds and their obsession with short-term trading opportunities, and a stock such as Google is likely to be quite volatile.

Eventually, the float for Google will expand, but this could take a year or so. In the meantime, unless you have a strong stomach and a willingness to speculate, Google is probably not your stock.

Google's dual-class share structure is another reason to think twice before investing in the upstart. Read more about it in Bill Mann'sGoogle IPO? No Thanks.

Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares in any of the stocks mentioned.