The US Securities and Exchange Commission (SEC) has
approved Google's plan for its initial public offering
(IPO).
Google can now close its share auction inviting bids from
potential investors and allow its underwriters to begin accepting
some of those bids to start public trading.
Google had said that the offer price for shares would be in the
range of $85 ($46.49) to $95 - down from the estimate of $108 to
$135 originally cited in its prospectus - but has now confirmed
that it will sell the shares at $85 each.
Google will trade on the Nasdaq under the ticker symbol "GOOG"
and is hoping to raise about $1.3bn from the sale of about
14.1 million shares.
The IPO has not been without hiccups. The company drew the
attention of SEC and California authorities by revealing that US
securities laws may have been violated when it issued unregistered
shares to employees and consultants in the past.
Google has offered to solve the problem by buying back the
shares in question, at a potential cost of about $25.9 million. An
informal inquiry into the episode is continuing, an SEC spokeswoman
said.
Another controversy centers on an interview Google's founders
granted to Playboy magazine in April, before the company filed its
IPO registration papers with the SEC.
The interview appeared in the magazine's September issue
(already on the streets) raising concerns that it might put the
company in violation of the Securities Act, which bars executives
from discussing their companyies' prospects in the run-up to an
IPO.
General consumer users should not be too concerned about
Google's IPO bloopers because, in the worst case, they can switch
to a competitor for internet services, said Rob Enderle, principal
analyst in Enderle Group.
But enterprise customers, such as those who have purchased the
company's Search Appliance, should be more worried, he said.
"The IPO has been horribly handled and it does reflect on the
way Google is being run. A corporate customer buys something and
expects to get support and a certain amount of service for its
purchase," and if the supplier cannot deliver, said Enderle, it
raises the level of risk the corporate customer has to take into
account.
"The mistakes are pretty much unprecedented in a company like
Google. This should be something the corporate buyer should watch,"
said Enderle.
Others think the fallout from the IPO bungles is not so serious.
"The company has got a lot of publicity for what is an unorthodox
way of raising money in the capital markets, and that plays well to
its brand image as a pioneer," said David Schatsky, a Jupiter
Research analyst.
"There has been a lot written about [the IPO] glitches, but [the
IPO] is only going to be good for consumers and other Google
customers."
"If being interviewed in Playboy is a mistake, it's about the
most benign mistake that a corporate executive has made in the past
three years," Schatsky added.
Google has been tight-lipped about how it will use the money it
raises from the IPO. In its prospectus, Google, without being more
specific, said it would use the money for general corporate
purposes, such as sales and marketing, research and development
and general and administrative expenses; capital expenditures; and
possible acquisitions of businesses, technologies or other
assets.
"The company has been extremely quiet about its strategic plans
and how it intends to use the money it is raising, so it is
reasonable to expect there will be no immediate visible impact for
either enterprise customers or consumers following this IPO,"
Schatsky said.
"Whatever changes it is planning are probably already scheduled
and will proceed according to a pre-determined timeframe, but the
offering itself will not precipitate any noticeable changes," he
said.
Google should focus on exploiting the value of its assets, such
as its technology platform, its infrastructure, its brand name, its
intellectual property and the vast amount of traffic it generates
as the most widely used search engine in the world, Schatsky
said.
"It would be wise to be selective about what it does. The world
does not need another portal, unless Google can provide the
functionality in a way that benefits dramatically from its unique
search capabilities," he said. "The company is built on the
strength of a small number of really good ideas."
How Google chooses to invest its IPO money will determine
whether it succeeds, like competitor Yahoo, or collapses like
internet supernova Netscape, Enderle said.
"If we were talking about a mature company, you would expect it
to be putting a lot of effort into research and development, to
build out a product suite. An immature company might go on an
acquisition spree. That is what Netscape did," Enderle said.
Based on the way Google has handled the IPO process, Enderle is
skeptical about the company's future.
"Since it is behaving more like Netscape, I'm concerned that it
will spend a lot of the money on perks and buying companies as
opposed to on much more sure investments," Enderle said. "The IPO
process gave us a view of Google that was anything but mature."
Laura Rohde and Juan Carlos Perez write for IDG News
Service