Company's decision to sell shares in auction a break with IPO tradition

In 1995 a technology company named Netscape went public. The stock soared in price on its first day of trading, an event that captured the public's imagination and paved the way for a bull market in technology stocks.

Most technology specialists don't expect Google's initial public offering to usher in a similar period of frenzy. But on the finance side, the company's decision to sell shares to the public using an auction, rather than relying on the traditional underwriting method, could prove to be historic.

''If this offering goes off without major snafus, you may be looking at a new model," said Stuart Cable, an attorney with Goodwin Procter in Boston.

Netscape, which made a popular Internet browser, turned out to be a trailblazer on Wall Street. The company's stock was originally priced at $12 a share. Because demand for the offering was so strong, the price was lifted to $28 on the day it went public. By the end of the day, the price had skyrocketed to $58, a signal that technology stocks were a hot commodity.

''Netscape was an event," said Howard Anderson, a venture capitalist with YankeeTek in Cambridge. Anderson doesn't look for Google's sale to have so dramatic an impact. He points out that the bursting of the technology bubble in 2000 demonstrated to investors how dangerous it can be to bid up the price of technology stocks to nosebleed territory.

Many technology companies disappeared after 2000; others saw their stock prices decline more than 90 percent. Technology stocks rebounded last year, but most are still priced far below their 2000 highs.

''We are not going to see a return to the old valuations," said Anderson.

Bob Davis, the former chief executive of Lycos, now a venture capitalist with Highland Partners in Lexington, said a return to the euphoric prices of the bubble era would not be a welcome development.

''We want to see a successful IPO, but we don't want the pendulum to swing too far," he said.

Marc Klee, who runs the John Hancock Technology fund, said it would be a mistake to make generalizations based on the reaction to Google's IPO.

''This is a unique vehicle," said Klee. Unlike most firms that go public, which often are small, unprofitable, and unknown, Google is already an established part of the landscape. The company's name is a household word and the firm is already in the black. Klee doesn't expect the Google deal to trigger a wave of technology IPOs.

With its decision to sell shares through an auction, Google is making a major break with tradition. Normally firms allow their investment bankers both to set the price of IPOs and to determine who should get the shares. In the late 1990s that method came under attack. Regulators accused several big investment banks of doling out shares in hot offerings to friends and favored customers. Small investors complained they were shut out of the process. Many of the firms that went public were unhappy because the benefits of the big price gains were captured by outsiders, not the companies selling shares.

In the document it filed yesterday, Google cited many of the troubles associated with the traditional IPO process. ''We believe that an auction-based IPO will minimize these problems," the company said.

Stuart Cable said an auction will mean that the investment bankers in the deal will have far less discretion than they would have under normal circumstances. ''This is an attempt to take a less arbitrary, more market-oriented approach," he said.

In its filing, Google made a similar point. ''Our goal is to have an efficient market price -- a rational price set by informed buyers and sellers -- for our shares at the IPO and afterward."

Charles Stein can be reached at stein@globe.com.