Updated from April 29

While Google touts its decision to let prospective buyers set the price in its initial offering as way to prevent speculation, the company has selfish goals, too.

The Internet search engine's decision to use a so-called Dutch auction to set the price for its shares means it's unlikely the stock will experience the kind of gargantuan first-day trading pop most investors came to expect during the dot-com bubble.

In fact, there's a decent chance the stock could drop in price soon after it begins trading, especially if investors decide they've overpaid for the Mountain View, Calif.-based company's stock.

In a Dutch auction, the company and its investment banks initially determine how many shares they intend to sell to the public, and establish a price range for the stock. Investors then submit bids proposing their own price for the stock and how many shares they intend to purchase. The process is supposed to help the company settle upon a fair price for its stock.

While there's much to commend in Google's decision to let the marketplace set the price for its shares, the process is one that tends to benefit the company more than investors looking for IPO gold. That's because a primary goal of a Dutch auction is help a company avoid leaving money on the table -- a move that often negates the possibility of an opening day trading surge.

"If we satisfy the demand for our shares at or near the clearing price for the auction, market demand for our shares when trading begins in the public market may be significantly limited,'' Google says on page 18 of its prospectus.

Google also warns that the auction could result in something known as "winner's curse,'' a phenomenon in which IPO recipients decide a stock is so fairly valued, it's better to sell rather than hold onto the newly minted shares. In that scenario, Google cautions the decline in the price of its stock could accelerate, if others investors are content to sit on the sidelines and wait for the selling to end.

The Google auction also won't necessarily be an exercise in shareholder democracy.

A close reading of the prospectus reveals that prospective bidders must satisfy the "eligibility and suitability requirements'' of Morgan Stanley ( MWD) and Credit Suisse First Boston ( CSR), the two big Wall Street firms underwriting the IPO. The prospectus doesn't say what those standards are and both investment banks aren't talking. But simply being a brokerage customer of either Wall Street firm won't necessarily make the grade.

"You should be aware that, due to each underwriter's requirements for new customer accounts, you may not be able to open an account with a particular underwriter,'' the company says. "Even if you are a customer of one of our underwriters, and even if you have received a unique bidder ID, you may not be permitted to submit a bid due to legal requirements.''

An investor lucky enough to get the chance to place a bid on Google's shares won't get to see what other investors are willing to pay. All the bids will be collected into a master order book that is available only to Google and the investment banks.

The Wall Street bankers and Google will then toss bids they deem to be speculative or manipulative. So some qualifying bidders may end up getting no shares. Bids submitted below the clearing price also may not get any allocations.

Wall Street will be closely watching the Google auction process. In recent years, there's been lots of talk about U.S. companies employing auctions to set IPO prices, but few have actually done so. The process has been more popular in Europe, but some say it's begun to fall out of favor overseas.

Before Google, one of the more notable companies to use a Dutch auction IPO was Overstock.com ( OSTK), the Salt Lake City-based online retailer, which went public in May 2002.

The idea of a Dutch auction was popularized by in the late 1990s by Bill Hambrecht, chief executive of WR Hambrecht, a niche investment bank that has specialized in Dutch auction offerings. Hambrecht's firm, however, is not one of the underwriters of Google's offering.

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