Google has done very well in the after market, but there is still discussion and analysis of their IPO. They got out, but in the end it took more of the 'Frank Quatronne' bookbuilding process than one would have expected with a Dutch auction. Did their IPO then fail to achieve its goals, and what does this suggest to others considering auctions?
VC Buzz believes that if they had followed the normal bookbuilding process, they would have come out at a higher price. Their argument is that the bookbuilding process lowers information risk to the investors. Even though it reaches a clearing price, the auction process does not lower info risk. In the Google case, there was a fairly wide spread of views and expectations of the offering - even though there was a fairly deep knowledge of Google itself. In other words, the info risk is over the stock price and potential after-market behavior, not the company itself - in other words, how do you value its prospects? While the auction process reaches a clearing price, it might very well be lower then it would have been in the bookbuilding process.
Most of the complaints of bookbuilding vs. auctions were from rapid stock pops, which seem to benefit the early investors over the company. If auctions come in a bit too low, they will similarly not reward the company, and could also result in similar pops - as Google did. If auctions come in too low and do not pop, the company then risks a loss of interest in their stock, which can be a real disaster for an emerging growth company - many got orphaned after the boom. Some of the complaints of the Frank Quatronne process were that it tended to favor the same firms, the ones that support IPOs, whereas the auctions are more democratic. But this argument is a mixed bag - a decent economic function is performed by those firms which participate in IPOs. Sometimes they do not pop, and the same investors are left holding the bag.
Conclusion: the auction process has not yet proven itself.