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Google Stays on Track Despite Best Efforts

By Cynthia L. Webb
washingtonpost.com Staff Writer
Monday, August 16, 2004; 9:44 AM

It looks like Google will be Miss August after all.

The Securities and Exchange Commission won't delay the search engine company's planned public stock offering even though co-founders Sergey Brin and Larry Page appeared in an interview in Playboy magazine, USA Today reported. Financial experts had worried that the interview – the latest in a series of quirky moves – might violate SEC-mandated "quiet period" rules and delay the IPO.

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That's all well and good, but Google might make an even bigger splash than the IPO could ever achieve. The Wall Street Journal reported that the company's unorthodox approach to the going-public game is one of the reasons the SEC is considering whether to overhaul its 71-year-old regulations. "During the late 1990s, Internet companies pushed the edges of the quiet-period rules, ramping up heavy marketing and advertising during the time leading up to their IPOs, calling such spending normal business activity," the Journal reported. "Given the hazy rules, companies often clam up and stop communicating any information about the business. ... But the rules, written decades ago, have caused headaches for many companies, in part because they don't take into account new technologies, such as the Internet and e-mail."

While Google's IPO timing appears to be on track, it performed some clever acrobatics to save face in light of the Playboy romp. USA Today noted that Google updated its regulatory filing with the text of the interview (That ought to spice up the average SEC filing), corrected some outdated details of the article and acknowledged that share buybacks are possible. "We would contest vigorously any claim that a violation of the Securities Act occurred," Google said in its amended filing.

"These steps are considered a sufficient remedy because they make the company responsible for the accuracy of the contents of the article. It also makes the information available to all potential investors," USA Today wrote. "If the company didn't take those steps, the SEC could delay the offering. Avoiding that was critical for Google, because further delays could put the deal dangerously close to Labor Day, a slow time for IPOs. Many traders are expected to be on vacation in late August and early September.

Google's promise didn't mollify the San Jose Mercury News. "Although legal experts describe the missteps as relatively benign, they've nonetheless become a pesky distraction reflecting badly on Google, just when management would like new investors to get on board," the paper said. "Some experts said the contents of the Playboy interview are hardly grounds for concern – if financial hype is the measure. There is almost no talk of revenue or profit. However, there is much talk of Google's ethics and vision, including a futuristic comment by Google co-founder Sergey Brin that ultimately Internet search engines like Google will have 'the entirety of the world's information as just one of our thoughts.'"
USA Today: Google IPO Won't Be Delayed By SEC
The Wall Street Journal: SEC May Update Rules Governing IPO 'Quiet Period' (Subscription required)
San Jose Mercury News: Google Scurries To Clarify New Goof (Registration required)

The Google scoop has been great PR for Playboy, the Journal reported. "This isn't the first Playboy interview to generate controversy in the feature's 42-year history. Most famously, in 1976, then-presidential candidate Jimmy Carter created a stir by telling the magazine, 'I've committed adultery in my heart many times.' Playboy has also featured several technology executives, including Bill Gates and Larry Ellison. But this is the first time [Playboy features editor Stephen] Randall remembers an interview becoming a part of an SEC filing." For the record, the magazine interviewed Apple Computer co-founder Steve Jobs in 1985.
The Wall Street Journal: Interview With Google Founders Is Publicity Boon for Playboy (Subscription required)

Betting On Google

As for the price of its shares, Google's auction process perhaps should be taking place in Las Vegas instead of cyberspace. The New York Times wrote about the types of investors Google's auction is attracting, including Violet Trout of Kentucky who has never bought stock before. "Ms. Trout was just one of the countless brave souls hoping to buy a small piece of Google in an auction expected to conclude some time this week. The competition to win pieces of Google involves suspense and strategy - not unlike the mind games people suffer through when bidding on a house in a hot real estate market. Some bidders are as inexperienced as Ms. Trout; others have long track records of winning and losing millions in the stock market," the paper said. Now for the gambling: "If all the winners bid high because of the hype surrounding Google, they may find themselves paying too much for a piece of an overvalued company whose shares plummet once they begin trading on the open market. A too-low bid, however, risks getting nothing. Many evidently thought of bidding but did not – in large part because of the misperception that one could participate only if they bid within the range the company set as guidance." Keep in mind that Google is trying to score as much as $135 per share.
The New York Times: In Google's Auction, It's Not Easy To Tell A Bid From A Bet (Registration required)

That sounds like a lot of dough, but investors seem eager to knead. "Attorney Lawrence W. Plitch, meanwhile, said he just wanted to relive the glories of the late 1990s, when technology stocks shot through the roof and showered riches on anyone lucky enough to receive IPO shares and sell them before the market began to crash in early 2000," The Washington Post reported. "It starts with the fact that I love the search engine," Plitch told the paper. "And I'm a little nostalgic for the go-go 1990s. I'm hoping this market starts getting a little irrational exuberance in it. ... This thing has some sizzle, and it's fun to be a part of it."

TheStreet.com writes about the handicapping surrounding Google's ongoing auction. "The main question facing investors, assuming that the deal comes off as planned, is what price Google's IPO will fetch. The company sprung a surprise on its far-flung audience earlier this summer by saying it expected its shares to be worth between $108 and $135 apiece. In offering up that price range Google valued itself at some $36 billion, an eye-popping number no matter how strongly the company has performed. Of course, Google's long-awaited appearance comes just as stocks in general, and Internet stocks in particular, have fallen on hard times. After a solid first-half run-up, online giants like Yahoo! and eBay have come under pressure in recent weeks as investors reconsider the present value of a bet on these companies' golden future. Meanwhile, the broader market has been hit hard in August by the high price of energy and uncertainty on other fronts." But the New York Post bet that Google will score high in the markets. "Amid all the grumbling about its initial stock offering, there's a good chance that Google will get its asking price – but just barely. Google, which began accepting bids for shares on Friday, expects to sell 25.7 million shares at an estimated price of $108 to $135. Despite the eye-popping price and the terrible IPO market, several analysts predict the company will meet its target," the paper said.
The Washington Post: Because Of, Or Despite, News, Bids Placed In IPO (Registration required)
The Street.com: Google Countdown Begins In Earnest
New York Post: Google Likely To Hit IPO Price Mark

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