On Monday, Google requested final approval from federal regulators to begin trading their stock. Google has asked that the SEC declare its registration statement effective as of 1 p.m. pacific time today. Google will not be able to trade shares publicly until the statement has been approved.
News reports estimate that trading could begin as early as tomorrow (Wednesday), but that trading is more likely to begin on Thursday. This would give Google time to finalize pricing for the IPO and to wrap up the dutch auction of shares that has been taking place since last Friday. At the IPO, Google will begin trading as GOOG on the Nasdaq stock exchange.
Although Google released estimates of $108 to $135 a share before launching their dutch auction, a recent down turn on Wall Street has many believing that the stock will end up trading at a much lower price. It is important to note that Google allowed their auction to run for only one business day before requesting final approval, suggesting to many that the auction bids have already provided enough buyers at Google's desired price to justify shutting the process down.
Google plans to sell 25.7 million shares in an attempt to raise up to $3.3 billion for the company. The final selling price of Google shares will not be released until the auction ends and underwriters analyze the bids to determine the selling price. Despite the use of the auction to determine share price, Google reserves the right to adjust the cost of shares as it sees fit.
Looming as a dark shadow over the IPO are issues that have prompted both the SEC and the California Department of Corporations to begin investigations of the company. Google's failure to register 23 million shares and 5.6 million options may cause problems for the company. Google issued the shares and options to employees and contractors between the fall of 2001 and this past summer, but failed to register them with their initial IPO application. Google has since offered to buy back enough shares and options to cover those promised to 1,406 people, but the individuals also have the option of rejecting the buyback and suing the company. The SEC investigation could result in fines and penalties for Google.
Additionally, an interview with Google founders Larry Page and Sergey Brin that appeared in Playboy this week prompted the SEC to require an amended registration statement that included the full text of the interview. Federal laws require that a "quiet period" be imposed on executives between the initial filing for an IPO and the day the company goes public. The interview was conducted in April, prior to Google's IPO filing, but was not published until recently.
Public opinion in some sectors has also shifted against the long-favored search engine in recent weeks. Online message boards and news articles are ripe with stories of would-be investors that have either been put off by the high share price, or from having been refused the ability to take part in the dutch auction offering. Investment houses have been required by the SEC to pre-screen would-be bidders to make certain that only those who understand the risks that they are taking be allowed to bid on shares of the stock. With no set rules over what makes an individual qualified to bid, many who have been turned away have expressed frustration and disappointment.
With trading expected to begin this week, many have stated that they will be waiting on the sidelines to purchase shares after the hype surrounding the IPO has faded. Many Wall Street observers have speculated that the dutch auction will result in a fair, or even over priced stock, leaving more room for the price to drop than rise. If this is the case, smart investors will wait patiently and purchase their share of Google anywhere from a few days to a few months down the line.
August 17, 2004
Jennifer Laycock is the Editor of Search Engine Guide, the Social Media Faculty Chair for MarketMotive and offers small business social media strategy & consulting. Jennifer enjoys the challenge of finding unique and creative ways to connect with consumers without spending a fortune in marketing dollars. Though she now prefers to work with small businesses, Jennifer’s clients have included companies like Verizon, American Greetings and Highlights for Children.
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