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Google Yields More Than Fistful of Dollars

By Cynthia L. Webb
washingtonpost.com Staff Writer
Monday, August 23, 2004; 9:38 AM

Ah, the burden of riches. All those lucky investors who bought into Google's vision had their dreams realized when the company went public last week, but their dreams of flashy sports cars and prime real estate are shot through with worries about how to manage all their newfound wealth.

The San Jose Mercury News yesterday reported that a good many of the company's nearly 2,300 workers will rake in a six- or seven-digit windfall now that they're members of what I call the "Google Riche." "Windfalls rapidly force recipients to think outside the box, beyond 1040-EZ forms, 401(k)s and whether to raise the deductible on auto insurance. Instead, they face a barrage of decisions about investments, taxes, insurance, spending, estate planning, charity – not to mention how to cope with their mooching friends, needy relatives and their own twisted emotions about money." Oh, the pity of it all. The article said that the "G.R." face three pressing questions: How much stock should I unload, how much do I owe in taxes and how do I keep the sharks away? It also contains this handy advice: "One of the first moves should be to update your insurance coverage. For starters, shop for an umbrella insurance policy that will provide extra liability coverage beyond your life, home and auto policies. Buy at least enough to cover your net worth, advisers say."
San Jose Mercury News: Suddenly Rich (Registration required)

_____Filter Archive_____
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Software Doesn't Break Laws... (washingtonpost.com, Aug 20, 2004)
Google's IPO: Grate Expectations (washingtonpost.com, Aug 19, 2004)
Tech Goes for Gold in Athens (washingtonpost.com, Aug 18, 2004)
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And the San Francisco Chronicle weighed in with some financial advice: "Find someplace safe to park the money, short term.
– Figure out Uncle Sam's cut, set it aside and don't touch it.
– Draft a simple estate plan, just in case.
– Start thinking about long-term goals – for you and your money."

While many Googlers, as the article calls them, aren't millionaires yet, the "stock's 27 percent rise in its first two days on the market bodes well for employees. If those gains hold, 950 to 1,050 Googlers will be millionaires, said Bill Coleman, vice president for Salary.com." So it looks like a financial advisory firm can be set up just to cater to Google employees (or soon-to-be ex-workers). Tax lawyer Jon Gallo told the Chronicle his advice for the G.R. "Let the money sit there earning interest for a while, before you make major decisions that will affect your life."
San Francisco Chronicle: Words of Wisdom For the Newly Wealthy

Meanwhile, the Wall Street Journal has a front-page article today on some folks that missed the boat on Google. Like this lead anecdote for the article: "Five years ago, Ms. [Emily] Cikovsky took cash instead of Google stock. She and an associate moonlighted for Google, preparing PowerPoint slides and speaking notes that co-founders Sergey Brin and Larry Page used to announce their first venture-capital funding. They were willing to pay her in stock options, she says. Instead, she sent them a bill for about $4,000. Her associate, Abbe Patterson, did take Google stock options for this and related public-relations tasks. Forgoing a $5,000 fee, she took options for 4,000 shares. After two stock splits, she has 16,000 shares. They're now worth $1.7 million."

More from the article: "The small world of Silicon Valley has always been a place of near-misses. But since the bubble collapsed, no tech phenomenon has inspired the sort of wistfulness that Google has. With the Web-search company's shares closing Friday at $108.31, up 27% from the initial-offer price, its market value is nearly $30 billion. Google coulda-beens can now tally their losses with precision. They include those who missed a shot at Google stock, Google jobs and even a chance to buy the whole company, cheap. They can comfort themselves – a little – that Google in the early years was far from a sure thing. It was just one of many search engines, and it hadn't yet worked out its lucrative advertising model. Besides, there are plenty of people who did take stock in new Silicon Valley companies and now have nothing, the firms having vanished when the bubble popped."
The Wall Street Journal: For Some Who Passed On Google Long Ago,Wistful Thinking (Subscription required)

The New York Times also chronicled the have-nots today. "Geoffrey Y. Yang, a top Silicon Valley venture capitalist, can take solace in all those companies he has invested in that produced rich payouts, including Ask Jeeves, NetFlix and Excite. But he will probably always rue the day he did not invest – the day when Larry Page and Sergey Brin arrived at his office seeking $25 million to expand their fledgling company, which they had named Google a few months before. Mr. Yang declined because he served on the board of Excite, a once-popular Internet portal that he thought at the time might compete with Google," the article said. And this will cause some venture capitalist to shed real tears: "From original investment to I.P.O., I'd have to say Google offers the biggest payoff in venture history," Jesse Reyes, vice president of Thomson Financial's Venture Economics, told the Times.
The New York Times: Google Is One For the Books, Leaving Some With Regrets (Registration required)

Will Everybody Be Going Dutch?

While Google caught a lot of flak for its untraditional IPO, the Monday morning quarterbacks are making their calls in Dutch.

The International Herald Tribune noted that in "1986, Microsoft's offering price valued the company at three times its revenue over the previous 12 months and 16 times earnings. The figures for Google now are 10 times revenue but 85 times earnings. The high valuation that has been accorded to Google now means that it will have to grow at a very good pace for many years to justify the prices that are now being paid, and the sheer size of the $29.7 billion market capitalization it now has will make that growth even more impressive if it does come. Google's auction process was messy, and the reduction of the expected offering price may have scared away some investors. But it worked well in the end and may well persuade other companies to try something similar."

Jonathan L. Zittrain, a Harvard law professor and co-founder of the school's Berkman Center for Internet & Society, applauded Google's IPO approach in an editorial that ran in the Boston Globe on Saturday. "At first glance Google's IPO might appear a retread of those of the late 20th century Internet boom: a company becomes the darling of the media and the public; its shares hit the Street for prices that are astronomical; volatile price swings give all but the most razor-sharp investors a financially nauseating ride. But there has been an important difference: Google chose to forgo the traditional investment bank IPO placement system. This was a bold move, but the right one, because that system is, on balance, awful. The classic IPO functions much like a private club in which underwriters and brokers parcel out pieces of the company to favored clients and friends, while almost every member of the general public wanting to trade cash for shares is left out to dry. ... Google gave the public a chance to buy shares directly, on an equal footing with banks and big traders. The response from the financial establishment was understandably sour," Zittrain wrote. He also noted that the Dutch auction process still has kinks that need to be ironed out, and he ended the piece with this prediction: "But as the IPO's opening bell fades, the clash between Google's contradictory egalitarian and elitist impulses are certain to make it a volatile investment as soon as next week, not to mention for years to come."
International Herald Tribune: News Analysis: Google Keeps Wall Street At Bay
The Boston Globe: Score a Victory For the P In IPO

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