Google Files for IPO

bobwyman manages to be the first to submit this story, apparently by using his own web service: "Well, the PubSub.com SEC Edgar notification system just sent a message a few minutes ago saying that Google has finally filed their S-1 to go public. See: Google's S-1 which was accepted by the SEC at 2004-04-29T13:53:49-04:00. If you had had a PubSub.com SEC Edgar subscription, you would have been one of the first to see this filing."

Re:More information

[Rude Turnip]

I almost fell out of my chair when I read how large they are in terms of revenues and earnings! Did anyone else think Google was maybe a $10 million dollar-revenue company or what?

Is it legal to...

[PurifyTheMind]

...promote their IPO on their main website? So far, they don't appear to be doing this... but wouldn't that pump up the price quickly? (IANA stock broker)

For the minions

[mix_master_mike]

How long after the stock goes public will the general population be able to purchase some? What's the game plan for these people - is Google worth the buy?

Re:More information

[strictnein]

Google's doing things the right way?

From the yahoo.com link:
The Mountain View-based company earned $105.6 million, or 41 cents per share, on revenue of $962 million last year. Google got off to a fast start this year, with a first-quarter profit of $64 million, or 24 cents per share -- more than doubling its earnings of $25.8 million, or 10 cents per share, at the same time last year.

It's refreshing to see an internet company actually pulling a good profit. Hopefully google will be able to use the money it raises to actually grow their business, and not do as so many other companies have done and just go out and spend their new cash on worthless crap (*cough*mp3.com*cough*). It'll also be very interesting to see how an auction-based IPO works for a company with as much interest as google. Interesting quotes from the SEC form:
We will not shy away from high-risk, high-reward projects because of short term earnings pressure.
It is important to us to have a fair process for our IPO that is inclusive of both small and large investors.

Nice introduction.

[Faust7]

From the Introduction to the Letter from the Founders:

Google is not a conventional company. We do not intend to become one.

Goodbye 1972 Maverick, Hello Porsche

[eltoyoboyo]

Employees will soon see some big cash:

The initial option grants to many of our senior management and key employees are fully vested. Therefore, these employees may not have sufficient financial incentive to stay with us.

Many of our senior management personnel and other key employees have become, or will soon become, substantially vested in their initial stock option grants. While we often grant additional stock options to management personnel and other key employees after their hire dates to provide additional incentives to remain employed by us, their initial grants are usually much larger than follow-on grants. Employees may be more likely to leave us after their initial option grant fully vests, especially if the shares underlying the options have significantly appreciated in value relative to the option exercise price. We have not given any additional grants to Eric, Larry or Sergey. Larry and Sergey are fully vested, and only a small portion of Eric's stock is subject to future vesting.

How is this good for them?

[JakiChan]

1) An IPO is a huge distraction. I doubt, given the hype, they'll be able to stay focused on their competitors.

2) Their competitors are coming on strong. Y! is making gains in the space.

3) They could suffer from a huge brain drain. If the IPO is uber successful then a lot of folks will get very rich and leave.

That being said, I wouldn't mind having some $.25 fully-vested google options right about now...

Auction

[dpille]

Looks like they're going with the share auction plan. Seems like the SEC filing [sec.gov] is buried, but the key details seem to be:

1) Underwriters manage the auction
2) You pre-qualify, etc.
3)You bid (and can multiple bid - ie, one bid for 9K shares at $20, another bid for 1K shares at $40, you'll get 10K shares if the price is $15)
4)The reject "manipulative" or "speculative" bids
5)They calculate a clearance price that'd sell all the shares offered according to the bids, and accept bids accordingly
6)They determine whether to hand out all the shares bid, give everyone 80% of what they asked for, give the bid/little guys everything they asked for, or let original bid price determine who gets everything they asked for.

I'd be really interested in what some professional equity people think of this process, it seems really interesting to me.

Google - stay exactly the same.

[caluml]

I hope Google keep to their game-plan that's made them the best, and richest search engine in the world. I hope shareholders don't start voting for popups on the main page, and lots of links to cheap holiday deals.

Re:IPO - not a great idea...

[TheFlyingGoat]

Yeah, because every company that has gone public has stopped innovative R&D and constant steady growth. Look at some of the major public companies out there (3M and General Electric) to see what R&D can really accomplish. Add in the fact that Google will gain at least $2 billion that they can use towards more services, current research, and increasing infrastructure. Your comment is baseless.

Eric Schmidt is going to be happy

[strictnein]

From the SEC form:


Eric Schmidt Employment Agreement

We have entered into an employment agreement with Eric Schmidt, our chief executive officer. The agreement provides that Eric will receive a base salary of $250,000. Eric was also granted an option to purchase 14,331,708 shares of Class B common stock at an exercise price of $0.30 per share pursuant to this agreement and was permitted to purchase 426,892 shares of Series C preferred stock at a purchase price of $2.3425 per share.

How long does he have to wait until he can sell? I'm sure he's got the date circled on his calendar.

Evil

[timealterer]

Although of course this was inevitable, it is somewhat disheartening. Google will become a company that is steered by stockholders. As everybody knows, most stockholders don't care about being not evil, or really anything other than profit.

Don't get me wrong, I'm sure the guys who own Google currently like profit, but public companies are different. A stockholder wouldn't normally feel bad if the company they owned some fraction of used terabytes of user information for slightly shady practices. The only publicly held company I truly trust is Apple, and of course there's no logical reason for that.

Dutch Auction

[Prince Vegeta SSJ4]

from what I've heard (on CNBC and elsewhere), Google [google.com] is also considering making (at least a small portion) of it's shares available through an Internet based "Dutch Auction".

This, of course, has some Underwriters worried, given that a fee in the range of 5% could yeild over 100 million dollars for an IPO such as google.

Many believe, however, that this will not indicate a trend due to the fact that this may be easy for google, because they are allready a household name. In most other cases, an auction will not be so easy.

I thought this very interesting

[MisanthropicProgram]

Top ten reasons not buy Google IPO [prweb.com]

Two stock classes

[Animats]

So that's the plan - two stock classes, one with voting rights. The insiders remain in control. Ford Motor is set up that way.

Traditionally, the NYSE won't list a company with more than one class of stock. But they've softened that criterion in recent years.

Re:Upcoming Open Source Alternative to Google...

[bigHairyDog]

I'm not trolling, I'm just a pessimist...

I'm sorry, but it's not going to beat Google.

You see, the open source community is capable of some amazing feats, but half of the most skilled search engineers in the world work for Google. They have an obscene collection of fantastically talented people working on theory that few others understand.

As others realise the money in search try and compete with Google the premium on employing search experts will go up so high that there won't be many with the principles to work on open source.

It's sad but true.

Re:from the WSJ

[abhisarda]

Here's the wsj article [wsj.com](for subscribers).

An interesting paragraph-
"According to the filing, Chief Executive Eric Schmidt made $ 250,000 in salarly and got a $301,556 bonus last year, plus other compensation of $2,894. Co-founders Mr. Brin, now president of technology and Mr. Page, now president of products, both got salaries of $150,000 and bonuses of 206,556.".

And you can compare the pay with other US companies [aflcio.org]. Other companies can learn from google here.

For those worried that Google will become a wall street pawn, here's what the founders are doing about it-
"The offering documents were filed with a lengthy letter, called the "Owner's Manual" for the company. In it, co-founder Larry Page said he and co-founder Sergey Brin have worried that the "standard structure of public ownership may jeopardize the independence and focused objectivity that have been most important in Google's past success and that we consider most fundamental for its future."

As a result, the founders "have designed a corporate structure that will protect Google's ability to innovate and retain its most distinctive characteristics."
Part of that will be a dual-class structure, in which the founders will hold a higher-vote class of stock that will allow them to control much of the company's fate.".

Bottom line? Once you go public, wall street makes you ride to its tunes. Preventing that at google will establish it not only as the intelligent company but a financially astute one too.

Side note-Berkshire hathaway is planning to soak up as many shares are available.
Any ideas what Google will do with the money it raises?

Re:Upcoming Open Source Alternative to Google...

[Doctor Crumb]

Security through obscurity doesn't work, and that applies equally well to a search algorithm. Because it's open, new innovations will come faster along with new ways to thwart abusers.

Don't underestimate the huge pool of talented amateurs just because the 'experts' all work for the other guys. You don't need to have a title and a six figure paycheque to come up with the next big thing.

Re:Auction

[Anonymous Coward]

This is almost exactly the same method that the US Treasury uses to sell government bonds. It is viewed by many academics as the most stable price discovery process.

Check out this link for more info:
http://www.googleinvestor.com/auction.asp

Re:from the WSJ

[Anonymous Coward]

Side note-Berkshire hathaway is planning to soak up as many shares are available.

I'm curious, where did you hear/see this?

Re:Rollercoaster Time

[santos_douglas]

except:

Although we may discuss long term trends in our business, we do not plan to give earnings guidance in the traditional sense. We are not able to predict our business within a narrow range for each quarter. We recognize that our duty is to advance our shareholders' interests, and we believe that artificially creating short term target numbers serves our shareholders poorly. We would prefer not to be asked to make such predictions, and if asked we will respectfully decline. A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.

Re:More information

[Skim123]

It'll also be very interesting to see how an auction-based IPO works for a company with as much interest as google

I have a sinking feeling that this auction business might lead to IPOs prices reminiscent of the dot com days. The average investor spends money on emotion and greed, not on business sense, so I could see a bunch of arm chair investors, who are longing for the 1998-2000 days, to drive this sucker up to insane proportions, at which time all the institutional investors will pull out, making the big bucks and causing the stock to fall back down to a sane price.

What might help abate a scenario like this, though, is that Google, according to this artile [internetnews.com], "will add a process to try to keep a lid on IPO mania by requiring potential bidders for IPO shares to become certified." I don't know how one becomes "certified," but if done right it'll cut down on the number of people that can participate, and thereby keep prices more in line, I think.

I know that not having an auction means that only those connected investors (Morgan Stanley and Credit Suisse First Boston) make out (and make out like bandits, to boot), but having a come-one-come-all auction could be a rude wakeup call for arm chair investors when they find that the $300/share price they paid for Google from little Jimmy's college fund was not money well spent.

A couple of things.

[blair1q]

First off, let's get something straight. Buying common stock on the open market is not investing. It's speculating. The investing occurred when money was given directly to the company for use in its operations by the VC's and by the Syndicates that bought the common stock and sold it into the open market. Those were investors. They drove the company and created its stable value. You and I buy a tiny chit representing something we have no effective control over which will probably never pay off in hard compensation but may, if we're very lucky, pay a few shekels in dividends and get traded in for the speculative paper of some company that wants to actually own this one.

On the other hand, get a load of the Summary Consolidated Financial Data. Not only is Google booming, it never even skipped a stitch through the "downturn". This is the strongest book I've ever seen, and I've seen a lot of these things (because I'm a savvy speculator, see).

So, what's going to happen? I'll tell you: you'll never see the stock hit the street.

Prior art: BajaFresh Mexican Cantina filed for an IPO a couple of years ago. We all love BFMC, and I'd even called their headquarters a couple of years before begging them to take my money and give me a piece of the action. Between the time they filed with the SEC and the putative issue date, they were bought lock, stock, and tortillas by Wendy's.

That's how things work. If the company is profitable enough, it's foolish to allow it to be publicly traded. Better to own it privately and pocket the profits in your personal account, or to own it as a subsidiary and use its profitability to cover for your flagging businesses.

So y'all can forget about buying that one share of everyone's favorite search engine and pinning it to your cork-board. This will be inhaled by IBM or Sun or someone with a bottom line to shore up.

Re:About fucking time.

[fastfurrytransform]

Be careful with that mortgage. Google is so widely known that the demand for stock may be quite disconnected from any actual business value. Further diluting the business value is the Ben and Jerry's style capital structure which essentially guarantees that the people that buy the stock at the relatively high prices of an IPO will have no real ownership. The way this shows up most negatively is when a company is doing poorly, the stock price tends to be limited on the low side to what it's worth to an acquiring company. Essentially, they don't trust their new "owners." Of course if they don't do poorly, no problem! Between the S1 (and the S1/A's sure to follow) filing's going effective in a month or so, expect to see some interesting, if arcane, discussions on corporate governance sites. It's laughable that Buffett is quoted in some favorable press reports. Buffett is known to dislike governance gimmicks like this. One other thing. Free, real time Edgar filings are available to everyone at www.sec.gov. They used to be delayed so these other vendors could make money but no longer are.

If you read today's "The Economist"...

[Anonymous Coward]

Check out this story [economist.com] about Google. "The Economist" advises against buying shares of Google because it is a loser.

Re:More information

[odin53]

The stock class they are selling to the public will not have voting rights. The founders will keep those so that they keep control.

This is not true; there's a 10:1 ratio (10 votes per share of class B stock and 1 vote per share of class A stock, which is the class being offered). What's true is that the B holders will retain control.

They explicitly state that they don't plan to ever pay any dividends.

This policy is typical of public technology companies. It's also typical disclosure in their filings.

So what exactly do you get for buying their stock again

Depends on what you're looking for...

Re:More information

[SEE]

There are only two ways a stock has value; if it pays a dividend, or if there is prospect of somebody buying it.

Now, why would any stock that doesn't pay dividends have anybody interested in buying it? There are three:

1) It gives control over the company's money
2) A dividend is expected in the future
3) The price of the stock is expected to be bidded up despite the lack of tangible benefits to owning it.

1) is essentially zero for non-voting stock; since it exerts no control over the company, it exerts no influence over the company's money. Your only hope is that the voting stock owners sign a merger deal that results in you getting reimbursed.

2) assumes that they will eventually pay a dividend. Since the company says it doesn't intend to, you're betting that they'll change their mind. Since your share is non-voting, you merely have to hope.

3) is the Greater Fool theory.

Non-voting no-dividend stock is almost worthless; its only real value is the possibility of a future change of policy by the voting-stock owners to give up control (a merger) or pay dividends. To value it highly, then, one must expect a Greater Fool to come along and buy it despite the lack of tangibles.