Google has ended the suspense — for now — by filing with the U.S. Securities and Exchange Commission to raise as much as US$2.7 billion through an initial public offering of stock. But, like many things the search-engine company has done, the IPO will have its share of twists.
Mountain View, California-based Google said it will sell all of its stock through an Internet-based public auction process, bypassing the traditional Wall Street route that critics say favors insiders and institutional investors over individuals. The alternative IPO also may help Google distance itself from its bubble-era brethren, many of which saw their stock prices skyrocket shortly after their debuts. Those price jumps have since become the subject of scores of lawsuits.
Because it will use an open approach — which essentially will allow investors, as a group, to set the price of the stock — the exact IPO offering price will not be known until shortly before the debut.
Google, which was founded in 1998, also said it will create two classes of stock, one that investors can buy and one for company insiders, to ensure that control of Google remains in the hands of its founders, Sergey Brin and Larry Page.
But while suspense over the filing itself is over, the waiting will continue for investors: Google said it has agreed with underwriters not to sell stock for nearly six months.
Google even managed to put a twist on the ordinarily mundane process of presenting IPO documents to the SEC, including in its paperwork an open letter from Brin and Page that declares in its first line that Google “is not a conventional company.”
The so-called form S-1 filing also gives the first real glimpse of Google’s financials, which show, as expected, that Google is both growing rapidly and making money. Last year, the company earned $105.6 million on revenue of $962 million. During the first quarter of 2004, Google’s revenues more than doubled, putting it on track to post $1.5 billion in sales this year.
The letter leaves little doubt that Google wants to avoid the fate suffered by other Internet companies, saying the company sought “a fair process for our IPO that is inclusive of both small and large investors.”
“Our goal is to have a share price that reflects a fair market valuation of Google and that moves rationally based on changes in our business and the stock market,” the founders write, saying their goal is a stable stock price after the offering. However, they did acknowledge that if fewer “professional” investors are involved, the opposite effect may occur, with investors hoping to cash in on the IPO buying and then quickly seeking to sell shares.
Not Your Average Joe
It also seems to warn investors against expecting Google to act like other publicly traded companies, noting that it will seek to continue unusual employee perks, such as free meals, washing machines and access to doctors.
“We will not shy away from high-risk, high-reward projects because of short term earnings pressure,” they write. “Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long term success, we will continue to seek them out.”
Google has shown a flair not only for technology, but also in its business practices of late. For instance, the official launch of the test version of its still-controversial Gmail free e-mail service took place April 1st and came complete with a tongue-in-cheek press release that had many speculating the entire thing was a joke.
Keeping Its Edge
Forrester Research analyst Charlene Li said Google’s unorthodox approach to the IPO fits with the company’s overall approach to the marketplace and the way it develops new ideas and services.
“Google rose to the top by not being bound by what others had done,” Li told the E-Commerce Times. The company’s internal culture, where employees must set aside 20 percent of their time to work on their own pet projects, is already legendary. “They might feel that’s their competitive edge and want to try and keep it as long as they can.”
In fact, the Google filing states Brin and Page will continue to keep a close hand on the company’s operations and calls Googlers — a nickname for employees — the company’s most important asset.