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Randy
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 Posted: Tue Aug 10, 2004 11:55 am Post subject: Google May Accept Bids for Initial Share Sale Friday (Update |
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"Google May Accept Bids for Initial Share Sale Friday (Update7)
Aug. 10 (Bloomberg) -- Google Inc., the world's most-used Internet search engine, may begin accepting bids for its stock as early as Friday after investors register to buy shares in the $3.3 billion initial public offering.
Google said the bidder registration process will close on Thursday at 5 p.m. New York time, according to a statement on its IPO Web site. ``The auction will commence soon thereafter,'' the Mountain View, California-based company said. Google spokeswoman Cindy McCaffrey declined to comment on when the IPO might take place.
Some investment banks are resisting the auction-style IPO set up by Google co-founders Larry Page and Sergey Brin, with three underwriters having dropped out. Google is moving forward in a slowing IPO market, with eight share sales canceled or delayed in July, according to Bloomberg data. State regulators are investigating the company's failure to register some shares.
``Some of their naivete is showing and the problems are showing,'' Michael Butler, chairman and chief investment officer of Cascadia Capital LLC in Seattle, said of Google in an interview. ``The market is telling you this might not be the most efficient means to price the deal. You can tell who wins if the stock trades down.''
Cascadia helps venture capital-backed startups raise money and arrange mergers.
Google has said in filings with the Securities and Exchange commission that it plans to sell 25.7 million shares for $108 to $135 each.
`Structure Is Challenging'
The eight IPOs withdrawn in July is the most since January 2003. Technology shares are lagging this year, with the Standard and Poor's 500 Information Technology Index declining 11.8 percent.
Internet stocks have fallen through July and August as Yahoo! Inc., Amazon.com Inc. and IAC/InterActiveCorp said second- quarter sales fell short of analysts' estimates. EBay Inc. forecast lower-than-expected sales for the rest of this year.
Not all investment bankers aren't embracing the auction- style IPO partly because they stand to earn less money on it than through traditional stock sales. Harrisdirect LLC, one of the 28 underwriters, may earn as much $200,000 -- less than the take- home pay of a first year investment banker.
Google may award investment-banking fees of 1.5 percent, said Michael Madden, principal at New York-based buyout firm Questor Management Co. The average is 5.6 percent this year, according to data compiled by Bloomberg. Merrill Lynch & Co., Royal Bank of Canada and SunTrust Banks Inc. have already dropped out of Google's plan to sell stock.
Challenging Structure
``It's a very large transaction, the structure is challenging for Wall Street,'' Phillip Facchina, head of technology investment banking at Friedman, Billings, Ramsey Group Inc., said in an interview. ``That's why some have dropped out.''
Facchina's firm is the No. 8 underwriter of U.S. IPOs this year.
The investment of time and money preparing for the Google share sale will lead the company and underwriters to complete the IPO, Butler said.
``A lot of investment banks, to comply with the auction format, have made a lot of investments in technology and the road show and organizing,'' Butler said. ``Not to get a payday would not sit well with them.''
Buying Stock
For some underwriters, the Google IPO will be a one-time event. Needham & Co., the New York-based investment bank founded in 1985 by former First Boston Corp. managing director George Needham, may not use the systems created for the Google IPO a second time.
``We have no plans to be involved again in the auction process,'' said Warren Foss, a managing director and head of institutional sales at Needham, in a June interview. He declined to comment further.
The California Department of Corporations and Connecticut regulators said last week they're conducting inquiries over unregistered shares Google issued to more than 1,000 employees and consultants. The probe may delay the IPO by a few weeks, Robert Clarkson, a lawyer with Jones Day said last week.
Google has said it may have violated securities laws in 18 states.
Investors who want to buy Google stock must have a brokerage account with one of the 28 securities firms underwriting the sale. To participate in the auction process, they must request a bidder identification at http://www.ipo.google.com , the Web site set up for the sale.
Once investors have their identification number, they will be able to place bids at a share price above, below or within the price range Google has specified.
Clearing Price
Google, founded by Page, 31, and Brin, 30, can decide against accepting bids it deems manipulative or disruptive, according to a company filing. Investors who submit more than one bid are responsible for paying for all bids that are successful.
E*Trade Financial Corp., the third-biggest online broker and a Google underwriter, will funnel all orders for Google shares to a Manhattan office, said Michael Klena, director of relationship management at E*Trade. After the orders come in, E*Trade will submit its final order book to underwriters Credit Suisse First Boston and Morgan Stanley.
Underwriters of a share sale similar to Google's will come back and set the final clearing price, Klena said. The order book for such an IPO will then be considered completed, he said.
E*Trade set up an electronic based system of taking orders and distributing shares in 1999. The company has participated in the $26.4 million IPO in January 2001 of Peet's Coffee and Tea Inc. and $27.3 million IPO of Internet magazine Salon Media Group Inc. in June 1999.
Auction
``The auction system gets rid of the idea of a discounted IPO because the investment banks have full knowledge of what people are willing to order and at what price,'' Klena said in an interview last month. ``It takes an hour or so to set the clearing price. The clearing price really jumps out at you.''
Google makes money by selling Internet-based advertising that users can click on after searching for the Web site they are seeking.
Google's revenue in the six months to June 30 was $1.35 billion and net income was $143 million compared with revenue of $559.8 million and net income of $58 million in same period a year ago.
Google said yesterday it issued about $290 million in stock to Yahoo! Inc. to settle a pair of legal disputes. The payout will cause Google to take a third-quarter loss.
Yahoo will receive 2.7 million Google shares, the company said in a statement. Google will record a non-cash charge of $260 million to $290 million for the settlement, it said."
Source: http://quote.bloomberg.com/apps/news?pid=10000087&sid=aHmNzNGVupU4&refer=top_world_news |
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