Google Defies Low Expectations, Jumps 18%

Updated from Aug. 19

So much for the Google (GOOG) IPO turning into a debacle.

Shares in the search-engine company rallied sharply with the long-awaited open of Nasdaq trading at noon today. The stock jumped to $100.01 on the first trade and briefly settled in the area around that number. Then Google surged to $103 and change before returning at midafternoon to the $101 range.

The stock rose $15.34 Thursday to close at $100.34, a sharp 18% rise. In Friday's premarket session, the stock added 66 cents, or 0.7%, to $101. Jeffries started the shares as a buy with a $115 price target.

The impressive rally had to relieve Google investors after a couple of rainy days in the much-discussed IPO. After much delay, the company priced its shares at $85 apiece Wednesday night, at the low end of a sharply reduced expected pricing range. The repeated price cuts had some wags predicting that the Google IPO would turn into a disaster for investors.

But if the offering price represented something of a blow to the company, Thursday's action had its redemptive qualities. Google shares rallied 19% even as the rest of the Nasdaq was flat.

The pricing and the beginning of trading cap what has been one of the most eagerly awaited initial public offerings since the turn-of-the-century tech stock bubble. The IPO may not have quite lived up to its initial expectations, but perhaps the stage simply has been set for a stock that can go nowhere but up from here.

The offering price, while far below Google's originally published expectations of $108 to $135, is still high enough to make paper billionaires out of Google co-founders Sergey Brin and Larry Page. And it's high enough to give Google a starting market capitalization of about $24 billion -- $12 billion less than rival Yahoo! (YHOO), and in the neighborhood of offline media giants like Fox Entertainment (FOX) and Liberty Media (L).

On Wednesday, the company dramatically scaled back the IPO, slashing its expected price range by around 25% and reducing the number of shares offered by selling shareholders. The move seemed to bolster the case made by Google critics who questioned everything ranging from the initial pricing range to the company's decision to run the IPO through an unusual Dutch auction arrangement.

The stock is certain to spend Thursday's session under the microscope as investors debate the meaning of every twist and turn in the new issue's trading.

And who knows? After the weeks of investor sniping about Google -- both the contents of the offering document and the general hype surrounding the IPO process -- it appears that everything negative that could be said about Google has been said. Depending on where Google ends up pricing the stock -- and depending on how much buy-it-at-all-costs investors have pushed up bids -- that could set the stage for a run-up Thursday, as on-the-fence or locked-out bidders for Google decide to make a bid for the stock in the aftermarket.