There are times when perception and reality diverge. I think we are at that point with Google
In the last few weeks, as we learned more about the company, the excitement turned to doubt. I think that now there is too much pessimism surrounding Google. The naysayers think the price is too high, every valuation measure is out of whack, and I have even seen some commentary agreeing with my thoughts about supply. There now seems to be a prevailing thought that the stock will fall from the sky once it starts trading.
My friends at Fisher Investments have done some important work analyzing consensus thinking. The takeaway from their research is that when everyone believes in one outcome, it can't happen, and I agree with that.
Google has more than a couple of things going for it, both as a stock and as a company. The intent of the Dutch auction process is to let the market find a fair value for the stock by accepting bids from a large number of investors. It is possible that the little guys will get it right.
Google reportedly has a 37% market share of search, and its founders figured out how to make search profitable. The company is likely to have revenue of about $1 billion this year. Most of the ratios will be higher than Yahoo!
At this point, no outcome will surprise me. My gut tells me that the Google IPO will not go well for every reason that you have already read about in other articles. The contrarian in me wonders whether the stock will do exactly what the founders want, which is come out and not fluctuate a whole lot. If the stock does not plummet, I will consider the IPO to be a big success.
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Fool contributor Roger Nusbaum is an investment manager and wildland firefighter in Prescott, Ariz. At press time, neither he nor his clients owned any of the stocks mentioned.