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Interest in Google sale limited

All according to plan - a mistake - or the right thing at the right time?

11:53 am on Aug 13, 2004 (gmt 0)

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"Google is now in a crisis situation, where they'll have to make some big decisions -- withdraw the IPO, change the price, or extend for some substantial time the registration for bidding. They know how many bidders they have. They're likely to fall way, way short of the 24 million shares hoping to sell."

10:37 pm on Aug 18, 2004 (gmt 0)

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Actually according to this article, it's the VCs who aren't selling any shares (thus dramatically scaling back the overall offering). Google itself (i.e. the company) will sell exactly the same amount of shares...

"According to Google's e-mail, pre-IPO shareholders expect to sell 5.5 million shares, less than half the 11.6 million originally planned. The company itself will sell 14.1 million shares, which is unchanged from previous filings."


There's been so much focus on the "headline" number dropping from $4 billion+ that nobody seems to be reporting that the money Google Inc. will bank is only going to drop by about 20-25% compared to the pre-IPO estimates (because they cut the starting share price). All the rest of the (much larger) drop is being left on the table by pre-IPO stockholders, *not* Google. But try finding that point in any article :)

In fact, if you completely ignore the pre-IPO shareholders (whose stock sales do not help Google Inc. in any way) then the picture looks like this.

Shares being sold: 14,142,135
$ raised at $108/share: $1,527,350,580
$ raised at $135/share: $1,909,188,225

Shares being sold: 14,142,135
$ raised at $85/share: $1,202,081,475
$ raised at $95/share: $1,343,502,825

In other words, even in the new "worst case" scenario, Google is going to bank over $1.2 Billion - which is $700 million (37%) less than the most rose-tinted, optimistic scenario, but likely still much, much more than if they'd gone the conventional "price it low and let's see what the market does" IPO route that all other companies seem to follow.

The real losers are the pre-IPO shareholders:-

Shares being sold: 10,494,524
$ raised at $108/share: $1,133,408,592
$ raised at $135/share: $1,416,760,740

Shares being sold: 5,500,000
$ raised at $85/share: $467,500,000
$ raised at $95/share: $522,500,000

So Google left 37% on the table (assuming best case pre-amendment vs worst case post-amendment) whereas the pre-IPO shareholders had to leave 67% of their "side" of the cash on the table.

While Google still comes off as looking a little too naive/greedy/optimistic, the real moral of the deluge of changes is "the IPO process isn't going to work at a high price if all the initial investors try and siphon off $billions on the first day".

This 31 message thread spans 2 pages: 31

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