The Google IPO

<< Previous

"There are good IPOs, and there are great IPOs. The Google IPO is the rarest kind: one that draws the white-hot glare of public attention."

- Marc Andreessen, Co-founder of Netscape and a public-offering expert, in March 2004.¹

"I would not be stunned if Google closes down. Internet search companies have been through the ringer for the past few weeks. A couple of up days don't make a trend. There isn't a full-throttle conviction behind this market."

- Brian Bolan, Analyst with Marquis Investment Research, in August 19, 2004.²

"It's certainly a success in that Google went public, and they did it the way they wanted to. But it was a failure in the sense that they didn't get the price they could've gotten if they had gone through the traditional method. And they did not eliminate the first-day jump."

- Matt Rhodes-Kropf, Associate Professor of Finance and Economics at Columbia Business School, in August 20, 2004.³

Introduction

On August 19, 2004, Google went public and came out with its initial public offering⁴(IPO). It turned out to be the 25^th largest IPO in corporate history and the biggest technology IPO⁵ till date.

Before its release, the IPO had been the subject of several controversies and the target of a lot of criticism. In fact, Google too seemed to have felt threatened by the controversies and just a day before it went public, it revised and scaled down its estimated per share price range from $108-$135 to $85-$95 per share. The company also reduced the number of shares it had planned to sell from 25.7 million to 19.6 million. What was unique about the Google IPO was the unusual auction method by which the company chose to sell its shares.

Google used the "Dutch Auction method" (Refer to Exhibit I) to sell its shares because it felt that under the conventional IPO method, most small investors would be unable to invest and the IPO would get limited to some large institutions, investment bankers, and their clients.

The Google IPO - Next Page>>

---

Custom Search

---

Marketing Financial Products Textbooks Collection	Case Studies in Finance Vol III Case Study Volumes Collection

1] Michael S. Malone, "The complete guide to Googlemania," Wired Magazine, Issue 12.03, March 2004.

2] Paul R. La Monica, "Google goes low," CNNmoney, August 19, 2004.

3] "Google Sets Possible Precedent for IPOs," The Associated Press, New York, August 20, 2004.

4] When a company lists for the first time on the stock exchange, the process is known as an IPO, new share issue or flotation. It is a way for companies to raise cash - and their profile.

5] "Google Sets Possible Precedent for IPOs," The Associated Press, New York, August 20, 2004.

6] "Google Sets Possible Precedent for IPOs," The Associated Press, New York, August 20, 2004.