Google --- Michael Moe
>> google is making a concession to forces detrimental to a new issue but investor michael moe of think equity partners says the way the market is now valuing google is fair relative to its rival yahoo. moe spoke earlier with ellen braitman and myself.
>> the auction process is going to do a decent job of finding the right price, but, clearly, the reseptifty on the road show has now been―the reception on the road show has been reflected in the revised price range. looking at the mid point, call it $90 per share, looks like visa vi it’s probably―its probably best comparable yahoo because google is growing at a faster rate and it actually has -- yahoo is about at a 50% premium on 2005 earnings estimates or in other words google about 1/3 at that mid point. somewhere around that range because yahoo is more proven and has a more diversified business, that seems to be sort of getting in the right zip code.
>> it’s interesting talking about the 55 expected 2005 profit because if you look at it in terms of market cap what it would be around $90 a share, the company then would be worth more than say lockheed martin, fedex, general motors. in terms of looking at other companies of course you’re talking about yahoo being a good comparison but talk about market value and how it would compare to these other companies, more established companies with longer term records of growth.
>> well, ultimately all companies are valued on both. its current earnings and, but also, importantly, future earnings discounted back to date. the fact that on reasonable guesstimates google will make over $500 million in profits next year faster than any company i’m aware of in the first five years of its existence, and the fact that it’s going to be growing still at a very high rate, what kind of multiple people pay on those earnings, it seems reasonable that some of these sunset industry investors don’t have as much traction to --
>> matt nesto here. you guys are an investment bank and one of the few i can think of aside from merrill lynch not involved in google. how come you guys didn’t get involved?
>> well, that’s a great question. we’re a firm that’s three years old. we’re growing very fast. our, to the best of our knowledge we’re the fastest growing investment bank our size or greater in the united states. that said, you know, this is a business that has relationships people have been pursuing for a long time and candidly we like to have an independent view in terms of our view of the prospects. it’s going to be an interesting horse race in terms of what’s going on in the market place and we look forward to calling it like we see it.
>> would think equity get involved in a dutch style auction if the relationships were in place at another company or you just don’t want part of this kind of underwriting?
>> well, honestly to be involved with fine companies and google clearly as fine company is a primary goal, so it certainly is not something we try to not be involved in. and the dutch auction i think is innovative. i think they’re probably to make it more prevalent and i think accomplish broader goals, i think there needs to be some significant adjustments made but fundamentally we don’t have an issue with the dutch auction process.
>> michael, given the i.p.o. market or let’s talk about the i.p.o. market , certainly google had reasons other than needing cash to do this i.p.o. and do it now which is really pressure from shareholders who wanted cash out of the company. you see it slashing the price. it’s a trend we’ve seen in recent weeks from companies that have done i.p.o.’s. what does that tell us about what’s to come? do you think that other i.p.o.’s now that were planned are just going to be shelved?
>> you’ve already seen a pretty significant slowdown in terms of companies that had hoped to, you know, entered the i.p.o. market , look at revising their time schedule and so forth. my personal view is the air pocket that we’ve seen the last couple months, which has caused the slowdown in i.p.o.’s and perhaps somewhat contributed to a reception of google today, i think that’s temporary. you look at the overall fundamentals of the market , which ultimately will be reflected in the i.p.o. market are good. you have, you know, good earnings growth, you have significant demand and balance for equities even with outflows last month you have over $250 billion of inflows over the last 16-17 months. so all of that sort of looks to me as a recipe that suggests that we could have a reasonably healthy i.p.o. market as we look at the closing out the year and into 2005.
>> michael, true or false, google had access to the best advice money could buy and they didn’t get it?
>> well, certainly true. they had, you know, the best investment banks in the world giving advice and again, it’s hard without being involved, knowing exactly what advice was taken and what wasn’t and what by the way is just sort of monday morning quarterbacking and reacting to things that happened in the market that you can’t control.
>> all right. folks, speaking of things you can’t control, regulators refuse a request from warren buffet. that’s right. we’ll tell you exactly what that request was and why he was refused.
