Google Defies Low Expectations, Jumps 18%

Shrugging off Wednesday's weak pricing, the stock closes at $100.34.
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Publish date:

Updated from Aug. 19

So much for the

Google

(GOOG) - Get Report

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) - Get Report

and

Liberty Media

(L) - Get Report

.

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.

That's the hope, at least, of one professional investor, who, after weeks of expressing skepticism about the IPO, acknowledged placing a few bids on Google stock in the new $85-$95 offering range.

Looking back on earlier Internet IPOs, the investor remembers the only company pricing its IPO in a tougher market as being

eBay

(EBAY) - Get Report

-- an IPO that didn't turn out too badly in the end.

Wednesday's price-range cutback came at the end of a most eventful period for the closely watched deal. Google had asked the SEC to declare the IPO effective Tuesday in hopes that Nasdaq trading could begin Wednesday. But the agency, without citing any reason, took no action on the request.

Wednesday's action also reflects the brutal market for technology stocks. Since Google registered the offering with the SEC in late April, the Nasdaq Composite is down close to 10%, and a handful of IPOs have been delayed or withdrawn. Since the end of June, shares in Google's largest Internet brethren -- Yahoo!,

Amazon

(AMZN) - Get Report

and eBay -- have dropped between 15% and 30%.

At the time of publication, Mannes had no positions in stocks mentioned other than Google, which he was long for the purpose of reporting on the auction process.

TheStreet.com

has waived the provision of its Investment Policy with respect to Mannes' ownership of the stock solely for the purpose of writing stories on Google's IPO. Mannes has agreed to sell his shares as soon as possible following his brokerage firm's 30-day "no-flipping" window for initial public offerings. As the situation warrants, he will be reimbursed by

TheStreet.com

for any losses, or donate any gains to a charity to be named later.