CurrentOfferings.com Story:

It�s a Go for Google

Howard Wolinsky, Business Reporter, Chicago Sun Times, Aug. 19, 2004

A GOOG is born, at last. After months of missteps and fumbling with initial public offering via an unusual Web-based auction that bucked Wall Street conventions, the troubled pregnancy of Google, the search engine company, is finally complete.

Wednesday night, Google sold 19.6 million shares at $85 each in its initial public offering to investors, far below the sellers' early dreams. Shares of Google begin trading at $100, up $15, on the Nasdaq Stock Market.

Because of an inhospitable climate for stocks in general and tech stocks in particular, plus other complications, the Mountain View, Calif., company lowered its initial asking price per share by about a third -- from a range of $108-to-$135 announced in July to $85-to-$95 targeted earlier this week. Google also cut the number of shares it offered to 19.6 million from 25.7 million.

As a result, the biggest initial public offering since the Internet bust is to raise $1.67 billion, compared with the original target of $3.47 billion.

"The downsizing of the mega-offering is a sign of current weakness for IPOs across the board," said Jeff Hirschkorn, an IPO analyst with Current Offerings, the IPO news Web site.

Google's founders were determined to go their own way, shunning Wall Street and offering shares via an online Dutch auction, in which potential buyers state a price at which they are willing to buy Google stock; the lowest price needed to sell all the shares becomes the final price.

Theoretically, that technique would attract the masses to the offering, but Google's original asking price of as much as $135 a share intimidated potential investors.

A survey by Chicago research firm Leo Shapiro & Associates, reported in the Chicago Sun-Times last week, suggested that Google had few takers, and they were willing to spend only about $450 on average to buy Google shares, which the survey said would come to far below the amount necessary to raise the projected $3.47 billion.

Google has become a verb meaning to look up something on the powerful search engine. A second definition may become Google as a verb for stumbling at an IPO.

The IPO at times seemed like a Keystone Kops operation. The company last week was criticized for possible violation of the "quiet period" imposed by the Securities and Exchange Commission after a high-profile interview with Google's colorful founders appeared in Playboy magazine. Google also had to deal with legal issues over technology with Yahoo!, its competitor and early backer.

Adding to Google's woes was the bumpy stock market, especially for tech stocks, which has prompted a dozen other companies to cancel their IPOs this month. (Still, one of the more successful IPOs this summer was Navteq, the Chicago digital mapmaker, which raised $880 million earlier this month.)

''Google has been hit by the perfect storm," said Arthur Levitt, former Securities and Exchange Commission chairman.

"What's occurred is a meltdown in technology stocks, an incredibly complicated way of handling a good, new process, and maybe most significantly, the firms sponsoring the Google offering have been so spooked by over-regulation," Levitt said. "Google has been a victim, actually, of all these events.''

Even with its reduced price targets, the Google IPO will make billionaires out of Larry Page, 31, and Sergey Brin, 30, who started the company in 1998 as grad students at Stanford University.

Google's offering ranks as the second in size among Internet companies, just below Genuity's $1.9 billion IPO in 2000. Genuity filed for bankruptcy protection in November 2002.

Google took on the traditional ways securities firms handle stock offerings and posed a threat to investment bankers' fees.

David Menlow, president of research firm IPOFinancial.com in Milburn, N.J., said, ''Wall Street is regaining control in this tug of war.''

Barry Randall of U.S. Bancorp Asset Management said Google's errors included a failure to court potential buyers with enough "road shows," in which investment banks present details of a share sale and company strategy to groups of fund managers.

''Google has made so many amateur mistakes during its IPO,'' he said.