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Google's initial share price set at $85
(Agencies)
Updated: 2004-08-19 10:50 Initial shares of Google Inc. were priced late
Wednesday at $85, the low end of a range revised downward just hours earlier,
humbling expectations for the most ballyhooed Internet company public stock
offering since the dot-com boom went bust.
Still, the offering remains one of the biggest and most highly anticipated
for an Internet business, surpassing most of the hot tech issues of the 1990s.
It will make billionaires — at least on paper — of founders Sergey Brin and
Larry Page, who started Google six years ago.
The final initial public offering price, set through an unorthodox auction
that alienated many on Wall Street, means the stock will likely debut on the
Nasdaq Stock Market Thursday. The $85 price values the world's most popular
search engine at $23.1 billion, more valuable than companies such as Amazon.com
Inc., with a market cap of $16 billion and Lucent Technologies Inc., valued at
$13.5 billion.
The IPO will raise $1.67 billion.
The logo of Google Inc. is seen outside their
headquarters building in Mountain View, California August 18, 2004. Google
Inc. slashed the size of its closely watched initial public offering
nearly in half to less than $2 billion, splashing cold water on what has
been touted as the hottest Internet IPO in years.
[Reuters] |
Earlier Wednesday, Google significantly lowered its estimated per-share price
range to between $85 and $95, down from the previous range of $108 to $135. In a
move that should buoy prices, it reduced the number of shares to be sold to 19.6
million from 25.7 million.
If the stock had debuted at the high end of the original estimate, it would
have raised as much as $3.6 billion and given Google a market cap as high as $36
billion.
In an e-mail to investors who successfully bid in the auction, Google said
individual brokerages would notify them of how many shares they would be
obligated to purchase at settlement, which is expected to be on Aug. 24.
Though there was no confirmation of when public trading might commence, some
analysts expected the stock to start Thursday.
"Typically, most deals start trading the morning after the SEC gives the
greenlight," said Bob Clarkson, a securities attorney at the Jones Day law firm
in Menlo Park, Calif.
The bumpy IPO process has created several clouds over the company that has
been criticized for being too idealistic, arrogant and reckless since it began
the IPO process four months ago.
Its prospectus indicates that Google still faces regulatory questions. In one
case, it said the SEC "has requested additional information concerning the
publication" of an interview with Brin and Page that appeared in September's
issue of Playboy magazine. That was a potential violation of the SEC's rules
against talking publicly before an IPO about information that is not included in
the prospectus.
Google also has admitted that the agency has launched an informal inquiry
into its issuance of millions of pre-IPO shares and options without registering
them.
The auction — another source of controversy — was supposed to democratize the
IPO process, which is usually limited to investors connected to investment
banks. Still, many analysts questioned whether Google's projected price was
affordable to average investors.
Before the downgrade early Wednesday, also announced in an e-mail to
potential investors, some observers had questioned whether Google's triple-digit
price estimate was realistic, given the rocky stock market conditions in recent
weeks. Several companies have delayed or abandoned plans to go public.
But Google, until Wednesday, surprised many by bucking the market trends for
so long. In fact, it's repeatedly been a source of surprises since it announced
its public stock offering in April.
It eschewed Wall Street tradition and decided that the final IPO price would
be set by an auction. Its founders wrote an idealistic letter in its prospectus,
outlining the company's "Don't Be Evil" mantra and plan to avoid the trappings
of traditional companies.
Google also has been embroiled in controversies. It revealed that millions of
its pre-IPO shares and options were issued to employees and contractors without
being registered, prompting a SEC inquiry.
John Tinker, an analyst at ThinkEquity Partners, said the initial price range
was overvalued and he wasn't surprised about the lowered price range, citing how
the auction process has been sloppy and complicated, and further exasperated by
Google's Playboy interview.
"The stock market has also been off, and Google has got to be affected by
that," he said.
Despite the missteps, few deny that Google is both very popular and
prosperous.
Since it was founded in 1998 by Stanford University students Page and Brin,
it has always been something of an oddball. Its design has no flashy ads but a
simple, quick-loading layout. Its search algorithm out-powers rivals. Its name
became synonymous with Internet search.
The Mountain View-based company, which makes money by selling unintrusive
text advertising, managed to prosper as a private company even while other
dot-coms were collapsing. Now, as the technology industry is just recovering,
Google stands to prosper even more.
In the second quarter of this year, for instance, Google earned $79.1
million, more than double the $32.2 million earned in the same period last year.
Sales also more than doubled, to $700 million in the latest period.
Page, Brin, employees and other early investors stand to profit handsomely in
the IPO — even with a lower anticipated range.
According to Wednesday's filing, the co-founders will each offer about
480,000 shares, which will be worth $43.2 million based on a final IPO price of
$90, the midpoint of the new range. Initially they planned to sell 1 million
shares apiece. They each will hold enough other shares to make them
billionaires, at least on paper, if the IPO is successful.
Venture capitalists won't be offering any of their shares initially,
canceling major payouts. Google board member John Doerr of Kleiner Perkins
Caufield & Byers was to have sold 2.1 million of his 21 million shares;
Michael Moritz, another board member and a partner at Sequoia Capital, was to
shed 2.4 million of his 23.9 million shares.
But Yahoo Inc. and America Online Inc., which were early investors in Google,
still plan to sell. Yahoo, now one of Google's biggest rivals, is selling
1,610,758 shares; AOL will unload 743,745, according to the filing. At $90 per
share, Yahoo would collect $145 million, while AOL, part of Time Warner Inc.,
would reap $66.9 million.
According to Google's e-mail, pre-IPO shareholders expect to sell 5.5 million
shares, less than half the 11.6 million originally planned. The company itself
will sell 14.1 million shares, which is unchanged from previous
filings.
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