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Google announced its intention to go public on the 29th of April 2004, making it the first “marquee tech IPO� since the dot com crash of 2001 (Salkever, A, 2004). with through a Dutch Auction, which was aimed at raising funds to the equivalent of $2.7 billion, or to be precise, $2,718,281,828, a mathematical gag of sorts, because the number is the product of "e" and $1bn, where "e" is the base of the natural logarithm (Matheson C., 2004). The floatation eventually managed to raise a total of $3.3 billion. Morgan Stanley and Credit Suisse First Boston as the lead underwriters for the IPO (Monica P.R.L., 2004).
July 21st 2004 saw Google choosing NASDAQ as the home for it’s stock, where it went under the listing of GOOG.
On the 26th of July 2004, Google sets a preliminary share price of $108 to $135. These shares were subsequently open for registration on the 30th of July at ipo.google.com, where applicants could get a 16 digit registration number that would be presented to one of 28 brokers to gain access to stocks (CNN.COM, 2004).
August the 13th Google’s shares were officially offered for bidding, this was followed by a request to the U.S. Securities and Exchange Commission on August the 16th to declare its registration statement effective, which would allow the company to officially start trading.
On August 18th, Google cut its share prices to $85 to $95 a share, and reduced the number of shares to be sold. Google closed its Dutch auction, and priced its IPO at $85. On this day, Securities and Exchange Commission approves Google’s IPO.
Finally on August 19th, trading on the NASDAQ finally begins, with share prices rising 17% to $100 at it’s opening trade. A total of 19.6 million shares were offered, At the end of trading, Google had raised $1.6 Billion, less than it’s actual target of $3.7 billion, due to lower than expected stock prices, but Google ended the day with a market capitalization of $23.1 billion, which makes it even more valuable than companies like Amazon.com, which is valued at $16 billion and Lucent Technologies Inc., valued at $13.5 billion (CBSNEWS.COM).
Google’s IPO is unusual in that it offered shares that are of different classes, which will allow the company’s management to maintain control over most aspects of decision making. The class A common stock being offered to the general public will hold 1 vote per share, whereas the class B stock will hold 10 votes per share. 33% of the class B stock will be retained by the company, thus effectively allowing them control over corporate decisions. This is not typical of an internet company, but is one of more “mainstream� media companies such as the New York Times (Olsen, S., 2004).
The way that Google went public, the Dutch auction, is also different from most companies in the US, who usually allow institutional investors reign over stock prices. This method was adopted to allow both large and small investors to have a chance to cash in on their IPO, which would not have been possible if the costs of the shares were determined by larger investors. This in turn would allow the company greater control of its own affairs that would have been lost if it had to take into consideration the views of larger financial investors (Glover, T., 2004).
As a result of the IPO, Sergey Brin, and Larry Page are worth $3.9 billion each, and Eric E. Schmidt, Google’s CEO, was holding $1.5 billion worth of Google stock (Rivlin G., 2004). An estimated 950 to 1,050 of Google's nearly 2,300 employees are paper millionaires of Google’s employees are instant paper millionaires (Wired News, 2004).
Some say that this sudden surge in wealth will affect the company's work ethic, and could cause a potential exodus in staff who leave to enjoey a life of leisure, or set up their own companies (Smale, W. 2004).
Google’s IPO has not been smooth sailing, 23 million shares of stock, which went unregistered for nearly three years have surfaced. Google has attempted to resolve this problem by buying back 23.2 million shares and 5.6 million stock options that have remained outstanding for $25.9 million including interest (Liedtke, M., 2004).
The SECs has also raised an issue of the violation of a “mandatory quiet period� by Google’s founders Larry Page and Sergey Brin, because of a Playboy interview, which they granted (Olsen, S., 2004) before the $2.7 Billion IPO in April. In the interview, details about the company were provided that were not in the prospectus and should not have been released prior to the IPO. The “quiet period� is enforced to prevent any conditioning of the market by circulation of any materials other than paper fact.
Analysts also see Google’s stock price to be volatile, because of the mistakes made along the way to the IPO as mentioned above, and comments made by executives on how they run the company (Wired News, 2004).
In recent times, Google has found itself in the centre of much controversy over the effects its recent IPO might have over the future of the company which has to date been the poster boy for the internet. Many worry that because of Google’s position as a roadmap to the internet, it might become the “Microsoft of Search� (Gomes, L., 2003).
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Salkever, A., (30 April, 2004) “Google This: Reality Check� Business Week Online, retrieved 11 Sept, 2004 from: businessweek.com
Matheson, C., (29 April, 2004) “Does Google Feel Lucky?� BBC News Online retrieved 11 Sept, 2004 from: bbc.co.uk
Monica, P.,R.,L., (30 April, 2004) “Google sets $2.7 billion IPO� CNN Money retrieved 11 Sept, 2004 from: money.cnn.com
CNN, (11 August, 2004) “Google’s IPO registration Auction Ends Thursday� CNN.COM retrieved 11 Sept, 2004 from: cnn.com
The Post.IE, (22 August, 2004) “Google Timeline� The Sunday Business Post Online retrieved 11 Sept, 2004 from: sbpost.ie
CNN Money, (2004) “IPOuch!� CNN Money retrieved 11 Sept, 2004 from: money.cnn.com
CBSNEWS.COM, (19 August, 2004) “Google Closes up 18%� CBSNEWS.COM SciTech retrieved 11 Sept, 2004 from: cbsnews.com
Liedtke, M., (5 August, 2004) “Google discloses possible securities violations� USA Today retrieved 11 Sept 2004 from: usatoday.com
Olsen, S., (13 August, 2004) “Playboy Interview may pose problems for Google� ZDNet UK retrieved 11 Sept, 2004 from: zdnet.co.uk
Olsen, S. (3 May, 2004) “Google’s Hard Bargain� CNet News.com retrieved 11 Sept, 2004 from: news.com
Glover, T. (15 August, 2004) �Are you about to get Googled?� Sunday Business, 15 August , 2004. pg. 1
Rivlin, G. (19 August, 2004) “Shares of Google Jump as It Debuts on Nasdaq� The New York Times retrieved 11 Sept, 2004 from: nytimes.com
Smale, W. (5 August, 2004) "Google faces possible Ferrari factor" BBC News retrieved 11 Sept, 2004 from: news.bbc.co.uk
Wired News (19 August, 2004 ) “Google Stock’s Whacky Debut� Wired News retrieved 11 Sept, 2004 from: wired.com
Gomes, L., (2003) “Google Is Most Popular But Other Search Sites Sometimes Do It Better� Wall Street Journal. (Eastern edition), Aug 18, 2003. pg. B.1
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Sherwin Huang 11:44, 27 Oct 2004 (EST)
