In September 2004, Google, the search engine company, floated some 10% of the company at US$85 per share. The structure of the IPO was a wee bit contrived (see ‘Google’s IPO: the last and longest laughs’) but it was successful.

And successful and successful and then a bit more successful. And then it took off. For the last week Google’s share price has been nudging US$300 per share. Only the fact that US$300 per share is a psychological benchmark at which investors sell can explain why it has yet to burst through the barrier and surge on.

Google’s market capitalisation is now in excess of US$80bn: on 1 October, when it made its debut, that market cap was under US$40bn, itself nearly 75% more than the value at the time of the IPO. The way in which the latter was conducted favoured institutions and lucky US-based investors, alongside staff and founders. This much-touted ‘ultra-democratic’ approach has driven the value of shares upwards be perpetuating a scarcity value for Google’s shares.

Even so Google's growth is scary. Bourse-based sceptics argued ahead of the IPO that it was over-priced. That seems hard to argue now with the shares on the verge of quadrupling in price in just nine months.

There are echoes of past mis-steps, however. Nobody is quite sure what Google really does and how it makes its money. Nobody can explain why Google might soon be worth four times its value at the time of its IPO and thus worth in excess of US$100bn.

Google is nevertheless one of the most exciting companies of the age. Yet it is almost alone among such exciting companies just now. Five years ago there were dozens of them. But that is precisely why we should be nervous about Google’s future.
Jim Chalmers