Google IPO: Type in 'confusing,' 'secrecy'

I've submitted my bid to buy shares of Google Inc. in the computer search company's giant auction-style initial public offering. That could turn out to be the good news or the bad news.

The Google IPO, which may raise $3 billion, has attracted a staggering amount of publicity and criticism for months in advance. The bidding for Google shares finally opened Friday morning and will probably close sometime early this week.

I jumped into the auction process 10 days ago, playing with the Globe's money, for the sole purpose of writing about the experience. Google promoted its IPO as a populist financial event, a triumph for the small investor, so I signed up to bid for the five-share minimum.

Here's what I saw from the small investor's perspective: an unnecessarily complicated, confusing process and an emphasis on secrecy when transparency should have been the standard. Investors of modest means really had to want to be part of the IPO to see it through.

Every bidder began the Google auction process the same way, by filling out a form with basic personal information on a company website. An e-mail assigning me a bidding number arrived within minutes. Next, I needed to open an account with one of 28 brokerages participating in the IPO.

It would have been difficult for most small investors to comb the list of options and identify a suitable broker. I wanted one willing to open a modest account ($2,000 or less) with no minimum account size rules for access to IPOs and chose Ameritrade on Aug. 5, several days ahead of the rumored auction opening.

After I wired money from my bank to the brokerage the next morning, Ameritrade unexpectedly told me the cash wasn't eligible for IPO transactions for five business days. Fortunately, the entire Google process had been delayed and I wasn't blocked from the auction.

There were other small complications for me, all solved along the way. But at each turn, Google and my brokerage rarely offered helpful information. They were more likely to be part of the problem, not the solution.

I went into the Google process expecting auction strategy to be important to my bid. But that isn't the case for any small investors who really want to buy some IPO shares.

Google estimated its IPO price in a range of $108 to $135 per share, though investors did not have to bid inside that range. All winners will pay the same IPO price, which is set at or below the clearing price. That's the highest price at which all the shares offered may be sold.

If the IPO price turns out to be $120, people who bid higher will get all or some of the shares they offered to buy. Others who bid lower won't get any.

Small investors whose bids won't influence the eventual auction price are better served aiming high if they really want to get their hands on IPO shares.

But that's a bad way to invest. Bidders who win the right to shares at $120 but believe the stock is only worth $100 haven't done themselves any favors.

So I tried to figure out how much Google could be worth. In reality, I am too skeptical an investor to have an interest in Google stock at a price it's likely to attract in the IPO. I approached the Google offering with the attitude of an enthusiastic, though not crazy, technology investor so my bid would have a reasonable chance of being accepted.

I came across intrinsic-value models that combine assumptions with real company financial information, often producing absurd conclusions. I saw relative value measures that assess a company relative to other similar businesses (this is how people lost a lot of money when the Internet bubble burst).

Then there were option-based models that relied on valuations the company itself put on options and other securities awarded to insiders. These numbers can be wrong, too, but they're worth a close look. Google recently estimated its stock was worth $116 per share, according to Scott Kessler, an Internet analyst at Standard & Poor's.

Kessler combined all these valuation models and came to the conclusion Google might be worth $121 to $127 per share. He recommended a bid below that range, at $110, though other opinions I sought were lower.

I did more research but finally concluded that $110 was a plausible bid for a tech investor who believes Google will continue to deliver much greater than average growth long into the future. The last-minute fiasco surrounding the founders' Playboy interview made me uncomfortable. But I pressed ahead, and did not change the price of my bid. So I punched it in, five shares at $110 each.

If I have one thing in my favor, it's timing. Google is pushing its auction out during the worst weeks on the calendar for IPOs and the broader tech stock market is in a funk at the moment. Type ''Google IPO" into the company's website, and you'll discover nearly all the media coverage of the deal has turned overwhelmingly gloomy. All the negatives favor buyers at the time of a deal.

This week, I'll pray for rain.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.