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IEM Opens Market for Google IPO

One of the most highly anticipated initial public offerings (IPO) in recent years is for Google, Inc., with Wall Street analysts buzzing about how much the company is worth. Now anyone who trades in the Iowa Electronic Markets (IEM) can speculate on the market capitalization of Google's stock at the end of the first day of trading.

Operated as a research and teaching tool by six professors at the University of Iowa's Henry B. Tippie College of Business, the IEM's Google IPO markets are open to the public.

For an investment of as little as $5 or as much as $500, traders can buy and sell two types of real-money futures contracts related to the Google IPO. In the first market, the payoff is based on the actual market capitalization (stock price multiplied by the number of shares outstanding) at the end of the first day of trading, up to $100 billion.

The second market offers winner-takes-all contracts, which pay $1 per contract to traders who pick the correct range in which the market cap falls at the end of the first day of trading. The market offers six contracts with different ranges, starting with the outcome of a $0 to $20 billion market cap, and ending with an outcome of a $40 billion market cap and above.

Known for its election markets that have accurately predicted presidential election winners, the IEM also has several markets that trade on stock price levels, but are only open to academic traders. But the Google IPO market is open to anyone, says IEM co-director Joyce Berg, including professional traders and analysts.

Student traders are also encouraged to trade in the Google IPO market, added Berg.

"MBAs and finance majors can learn about how IPOs are priced, putting themselves in the role of industry analyst," said Berg. With a great deal of information available about the Google IPO from Securities and Exchange Commission filings, web sites, analyst opinions and other sources, IEM traders can make an informed decision about what they believe the firm's value will be."

In addition to the Google IPO markets, the IEM's current markets related to the 2004 presidential election continue to draw traders and national attention.

Six professors at the Tippie College of Business have been using these markets to predict each U.S. presidential candidate's share of the popular vote since 1988. The IEM has established a reputation for forecasting election results with great accuracy, predicting the outcome of the popular vote with an average election eve prediction error of 1.37 percent.


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