Google tanks?

Google’s IPO has been getting consistently bad press in the last few weeks. “Don’t expect much,” we’re told. “They won’t actually do very well,” we’re told. “Competition is much worse than we originally believed, the economy isn’t doing very well, and you know what? those two founder guys are smarty-pants jerks.”

This is all a little unusual, given that we’re used to seeing high tech IPOs being pitched with something more like insanely irrational exuberance. What gives? Here’s a good article that explains at least some of the reasons behind the bad press: Jubak’s Journal (MSN Money). It turns out that the investment bankers who usually profit by making sunny predictions for IPOs won’t be coming in for their typical unfair share of cash with Google, so they’re taking their PR machine and going home. It just underscores, once again, that you can’t expect people, especially investment bankers, to give up their fat cash cows without a fight. Just ask them. They’ll tell you a good story about how they not only deserve all that money, but they’re actually providing a valuable service to the economy.

I think this situation is all to the good. We don’t need another bubbly frothy tech IPO, so if Google tanks on its own merits, fine. On the other hand, it’s great to see the old system being punctured, so if Google takes off, that’s great too. As the Economist puts it:

Google plans to bypass the traditional way IPOs are sold. It will establish the share price in part through an auction, rather than by relying solely on highly paid investment banks to set it. That last bit is welcome news. The traditional way of floating a company is neither very efficient nor sufficiently transparent.

Every time innovations in financial markets take money away from bankers, you would swear the sky was going to fall. Hasn’t happened yet.