- The Washington Times - Friday, August 6, 2004

SAN FRANCISCO (AP) — All the glee and glamour surrounding Google Inc.’s IPO is rapidly dissolving into feelings of dread and derision about the online search engine’s long-awaited stock market debut.

The backlash has been mounting since Google’s July 26 disclosure about its plans to sell 24.6 million shares at $108 to $135 apiece — an unprecedented per-share price for a U.S. initial public offering.

The second-guessing has become even more prevalent in recent days amid widespread confusion about the unorthodox auction Google is using to distribute its IPO shares and worries about potential legal problems involving how the company doled out stock in the past. Google also hasn’t set a specific date for the start of the auction, although its latest Securities and Exchange Commission documents indicate it might happen this month.

To make matters worse, investors are souring on the stocks of many Internet companies, amplifying the questions about whether Google’s IPO can possibly live up to its tremendous hype.

“This could turn out to be a real dud,” said Tom Taulli, a longtime IPO analyst who runs the Web site, Currentofferings.com.

A Google spokeswoman declined to comment yesterday, citing securities laws that limit the public remarks companies can make before their IPOs. Those restrictions essentially have left Google defenseless against its critics, a handicap helping to propel the attacks against the IPO.

“Part of the reason for this backlash is that the only voices we are hearing are potential buyers and they don’t want to do or say anything to promote the stock that would drive the price higher,” said Barry Randall, portfolio manager for the First American Technology Fund.

Google’s target IPO price appears to be the company’s biggest public relations problem. Since the company established the price range, “it seems like the commentary [about the IPO] has been turning more and more negative,” said Matthew Crowder, who runs a popular online discussion board at www.google-ipo.com.

The discussion board has been peppered with denigrating remarks during the past two weeks, punctuated by subject titles such as “Google’s Valuation: The Emperor Has No Clothes” and “You Are About To Be Had.”

Much of the investor resentment seems to center around Google’s refusal to split its stock before its IPO. That decision assured Google’s shares will be priced well above the $7 to $15 typically demanded in the IPOs of U.S. companies.

If it had done a 10-for-1 stock split, Google could have pushed its IPO into that range while raising the same amount of money and still realizing a lofty market value of $29 billion to $36 billion.

Because individual investors typically feel more comfortable buying stocks with a nominally lower per-share price, Google probably would have generated more investor enthusiasm with a pre-IPO stock split, experts said. “A $15 stock just looks less intimidating than a $100 stock, even though the mathematics don’t really change,” Mr. Randall said.

Google instead decided to follow the lead of billionaire investor Warren Buffett, who believes stock splits attract speculative investors. Google co-founders Larry Page and Sergey Brin — the company’s biggest stockholders — hope to place their shares in the hands of long-term investors.

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