The Indomitable Investor: Why a Few Succeed in the Stock Market When Everyone Else Fails

Media Misreads Google

Consider Google and the press coverage of Google’s 2004 initial public offering (IPO)—when it sold stock for the first time. It is surprising to see how much skepticism existed on Wall Street and in the financial press. Weeks before the IPO, Stephen Wozniak, a co-founder of Apple, told the New York Times that he would not buy Google stock because experience proves that a few people make out big, and that he didn’t think the stock’s price would likely rise much in the future. Google’s stock was priced at $85 for the IPO. The offering raised $1.67 billion and valued the company at $23.1 billion. The New York Times warned readers of Google’s “bubbly” valuation. “Only time will tell if the company can fend of efforts by Yahoo! and Microsoft to build superior search engines,” the Times intoned in an editorial. By 2011, Microsoft and Yahoo! were practically has-been stocks compared to Google.21

Time magazine warned readers before the IPO: “Google’s IPO: Buyer Beware.” Newsweek confidently said: “This price is insane. And anyone buying Google as a long-term investment at $109.40 will lose money.”22

Wall Street’s analysts, who are often the primary sources for most financial news reports, were just as bearish. On October 13, 2004, when the stock was trading above $140, only 30 percent of the analysts who follow Google stock rated it as “buy,” while 60 percent rated the stock as “hold,” and 10 percent rated the stock as “sell.” Schaeffer said:

What we had here was ...