- The Washington Times - Thursday, August 19, 2004

Google Inc. raised $1.67 billion yesterday in its initial public offering of stock, among the largest ever by a technology company. Shares surged 18 percent in the first day of trading to close at $100.34.

The long-awaited — and heavily promoted — public offering left Google, a six-year-old company that runs the world’s most popular search engine, worth more than $27 billion.

Larry Page, 31, and Sergey Brin, 30, met as doctoral-degree students at Stanford University and started Google, based in Mountain View, Calif., in 1998. Yesterday, Mr. Page rang the opening bell at the Nasdaq Stock Market in New York’s Times Square but declined to answer questions.

Analysts said Google held a successful public offering, even if the company generated less money than it planned to raise.

“They did raise a good amount of money, and their valuation is significant. A lot of companies would like to have a valuation at that level,” said Tom Taulli, co-founder of IPO research firm CurrentOfferings.com, in Newport Beach, Calif.

Google’s value is equivalent to automaker General Motors Corp.’s.

The company, which said April 29 it would go public, priced shares late Wednesday at $85 each. That was far below the $108 to $135 a share that the company initially planned to charge for each share.

There were other surprises. Google issued significantly fewer shares than advertised. Google and its stockholders sold a combined 19.6 million shares yesterday. The company planned to issue a combined 25.7 million shares, but Mr. Brin and Mr. Page cut in half the number of shares they sold.

They still generated vast personal wealth through the stock offering. Mr. Page made $41.1 million through the sale of shares, and Mr. Brin made $40.9 million.

Venture capitalists Sequoia Capital and Kleiner Perkins Caufield and Byers decided not to sell any of their holdings.

Selling fewer shares at a lower price meant Google didn’t raise all the money it hoped. Google planned to raise up to $3.6 billion through the sale of stock yesterday.

But questions about 23.2 million shares that Google issued to employees and an interview that Mr. Brin and Mr. Page granted to Playboy Magazine drew regulatory scrutiny and lowered interest among investors. Google said this week the Securities and Exchange Commission is investigating whether the interview violated rules prohibiting company officials from promoting stock before the sale of shares. California regulators said two weeks ago they are investigating deals to issue stock to employees, and on Monday Google said the SEC was looking into the transactions, too.

“I think people decided they can wait,” said Bill Mann, senior editor for investing at the Motley Fool, a financial media company in Alexandria.

A soft market for stock offerings also contributed to Google’s decision to price shares at $85 each, Mr. Taulli said.

“I think if the Nasdaq was on the way up or stable and if Internet stocks hadn’t dived, it would have been a different story. Market conditions have a huge impact on IPOs,” he said.

At 11:55 a.m. yesterday, Google’s stock started trading at $100.01 a share on the Nasdaq Stock Market, $15.01 higher than its $85 initial offering price.

Even while Google issued fewer shares than planned and demand was lower than expected, investors engaged in frenzied trading and 22.3 million shares traded hands.

The stock hit a high of $104.06 a share.

Mr. Mann said Google shares are overpriced and predicted they will decline steadily.

Google sold stock through a so-called Dutch auction that allowed investors to submit bids for shares over the Internet, by fax and by telephone. The company said the method would let small investors get more shares and set a stable price.

Mr. Mann predicted underwriters will lead a revolt against Dutch auctions because the method reduces the amount of money they make through initial public offerings and try to prevent other companies from using Google’s approach.

“They are going to want to nip this type of sale in the bud,” he said.

Google, which has indexed more than 4 billion Web pages, reported this week that it had net income of $143 million during the first six months of the year on revenue of $1.35 billion.

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