Capital Markets

Google Files IPO

Internet search-engine company hopes to raise $2.7 billion through its offering, to be kicked off by a public auction. Founders refuse to project q...
Craig SchneiderApril 30, 2004

Late yesterday afternoon, Google Inc. filed for an initial public offering, ending months of anticipation that the Internet search engine would emerge from private prosperity and open itself up to public scrutiny. Google hopes to raise $2.7 billion through its IPO, which won’t take place for several months.

The offering, the first marquee-name, high-tech IPO since the collapse of the dot-com boom three years ago, will be in an unusual form. Google’s share price will be determined through a public auction in late summer or early autumn, the company noted in its S-1 filing with the Securities and Exchange Commission.

Will investors go for Google shares with gusto? Morgan Stanley and Credit Suisse First Boston, the investment banks managing the offering, hope so. The use of the auction format is intended to give the public a better chance to buy the stock before shares start trading, thus affording general buyers a privilege normally restricted to investment bankers and institutional investors, according to Reuters.

With its IPO filing, Google’s finances have become part of the public record. The Mountain View, California-based company earned $105.6 million, or 41 cents per share, on revenue of $962 million last year, according to the S-1. Google made a first-quarter profit of $64 million, or 24 cents per share, more than double its earnings from the same period a year ago.

Former Stanford University graduate students Larry Page and Sergey Brin, who founded the company in 1998, have vowed not to make projections of Google’s earnings quarter to quarter, according to an open letter attached to the SEC filing. “A management team distracted by a series of short-term targets is as pointless as a dieter stepping on a scale every half hour,” they noted.

Still, Google is likely to face a bevy of other distractions. It will, after all, be going public at a time of increased scrutiny of corporate governance under the Sarbanes-Oxley Act. What’s more, the Silicon Valley company will face a new way of accounting for employee stock options. The Financial Accounting Standards Board has proposed that public companies expense the options using either a formula akin to the binomial method or the widely used Black-Scholes option-pricing model.

Page and Brin will run the company along with chief executive officer Eric Schmidt, a former senior executive at Sun Microsystems and Novell Inc.