On Thursday, April 29, 2004 Google filed with the Securities and Exchange Commission to sell up to $2. 7 billion in stock in an initial public offering. The auction process is taken from the company’s registration statement that was filed with the Security and Exchange Commission. The IPO would rank Google among the fifteen largest IPO’s in US history. Estimates of the post offering market value of the company vary, topping at about $25 billion, making the company more valuable than Sears Roebuck and Marriott International Hotel Inc.
Google plans to offer their IPO using the auction process. The Dutch Auction Process The auction system Google intends to follow is based on the Dutch auction system is modeled after Netherlands’ technique of selling flowers. It is a fairly new process in the United States. Less than a dozen companies have used this format to go public in recent years. In the Dutch auction, the number of shares is fixed but their final price is determined by anyone.
The process is believed to help even the playing field by lessening the influence of the investment banks and their favored clients, and sets a fairer market price however with so much potential traffic the auction could overload computer servers. Computers sort and rank the bids by price from the highest to the lowest, calculating the highest bid price that will sell all available shares. Google IPO Facts Google has chosen Credit Suisse First Boston and Morgan Stanley to lead the initial public offering (IPO). This assignment is expected to generate investment banking fees of nearly $100 million.
Based on Google’s estimated value of $25 billion, the 30% shares held by the two founders, Larry Page and Sergey Brin would make them worth about $4 billion each. Following is a list of other major stockholders of Google who also stand to benefit from the IPO. As stated earlier, the Dutch auction process differs from the traditionally used methods of underwriting IPO’s in the United States. The IPO and allocation of shares will be determined primarily by Google underwriters on their behalf. The auction will be conducted in five stages; Qualification, Bidding, Auction, Closing, Pricing, Allocation.
The Qualification Process Google’s objective is to conduct an auction in which the bidder submits informed rather than speculative bids. Before a bid can be submitted, a bidder is required to qualify by obtaining a unique bidder ID and meeting an underwriter’s account eligibility and suitability requirements. A bidder ID is issued electronically after the bidder has assessed an electronic prospectus, the transcript of the presentation by the management team contained in the prospectus, and provided identification information.