I just got received an e-mail asking what I think about Google’s IPO. I thought I’d answer it here because with all the hype the IPO is receiving, I’m sure many people have the same question. (And besides, I need something to blog about during this boring week.)

Bambi Francisco wrote a piece about the Google’s IPO in which she made a lot of great points about relative valuation and the increasing supply of internet stocks. I think she did a great job in covering all of that stuff, so I won’t bother talking about those issues.

My concern with this IPO is that it’s over-hyped and the little guy will be left holding the bag. No doubt those who get in at the offer price (the price set by the underwriters before the stock trades publicly) will do very well once the shares hit the open market. But my fear would be that the stock opens at a huge premium to the offer price and drops like a rock from there. (Remember what happened to the PALM IPO?) I doubt that Google will be as spectacular as that on the upside or the downside. My guess is that the underwriters will do a much better job of pricing the offering realistically and thus there will be no huge profit that people are panicking to take.

As with any IPO, I wouldn’t recommend buying shares until after the stock’s traded for a while — like a month or so. The underwriters usually initiate coverage on IPOs after 22 days (I think) of trading, so I’d like to see how the stock reacts to their obligatory bullish hype and aggressive price targets. And certainly the first 2 or 3 days are only for daytraders who have the quickest of execution systems and/or those with strong stomachs. One of my favorite set-ups is to catch a recent IPO right when it makes a new all-time high after it’s been trading for more than a month. It’s very typical for these new issues to make a bowl (cup) pattern. I like to buy them when they complete the right side of the bowl and notch that new all-time high. That generally makes sure that the sellers are gone, and anybody that shorted it is now scrambling to cover. The climb back up to the old high will also show you that the stock’s got some real sponsorship.

That’s about all I can say for now. I’ll revisit the topic once the stock starts trading.

Update: Now that they’ve filed for their IPO I’ve added some more interesting notes here.