Google trading may begin today

Stock initially will trade at $85 per share on Nasdaq

Smaller payoff for founders, investors

Auction closed after SEC gave final OK yesterday on sale

August 19, 2004|By Tricia Bishop | Tricia Bishop,SUN STAFF

Google Inc., the Internet search engine company that has sparked renewed visions of a technology stock market bonanza for more than a year, is expected to begin trading on the Nasdaq market in the immediate future, possibly as early as today.

But the number of shares to be offered to the public has been substantially reduced, and the expected size of the payoff for the Google founders and early investors will be significantly smaller than earlier expectations.

Google stock will trade at $85 a share - a far cry from the $135 the company originally was hoping to get. The stock-sale bounty is expected to be more than $1.67 billion, but far less than the nearly $3.5 billion that had been hoped for.

Google officials lowered their estimate of the anticipated price and number of shares the company planned to sell in a filing with the Securities and Exchange Commission yesterday morning, and closed its auction in the afternoon after the SEC gave final approval to the stock sale. Before trading could begin, Google had to set the final price, alert bidders and allocate shares.

Some said the price drop indicates Internet stocks are still too risky, several years after the dot-com bubble burst. Others said Google's business potential has been overestimated, and still others said the company is worth more money. The only thing analysts agreed on was that there has been a lot of noise about Google.

Google, which won the hearts of Internet users by quickly delivering the most satisfying results to those searching for information, has evolved from a technology company into an advertising vehicle with popularity that competitors have yet to match.

But other search engines are closing in and investors have had to consider whether Google can preserve its preeminent position, whether advertisers will continue to do business on search engines, and - perhaps most importantly - whether Google can overcome the criticism about its initial public offering to keep its beloved status.

Media have dissected Google daily in the weeks leading to its stock offering, chronicling every strange twist and turn (and there have been many) on its four-month journey to becoming a public company.

Analysts called its initial stock estimate overpriced, reporters called the business a "wunderkind," and fans left declarations of love for Google all over Internet message boards.

It's a business wonder with some reason, some experts say.

David Berkowitz, a search engine marketer with icrossing in Arizona, likens it to a 21st- century phone book - "this incredibly successful advertising business and yet no one who really uses it on the consumer end thinks of it that way. They just think it's the most convenient way to find something."

Cautious about future

But rich as Google's promise is, investors are cautious about its future.

The company originally estimated its stock would cost between $108 and $135 a share, giving the Mountain View, Calif.- based company a market capitalization of as much as $36 billion.

But its Dutch auction designed to set the final price returned lower than expected results, and Google readjusted its rate yesterday, causing shareholders to hold back.

"In view of this new price range, the selling shareholders are reducing the shares they expect to sell" to 5.46 million from 11.55 million, Google said in an e-mail to investors yesterday.

The most Google can hope for in market capitalization now is $23 billion, which cuts the two founders' worth to a potential high of $3.2 billion apiece from $5.1 billion.

Controversy has dogged Google in recent weeks.

The company was accused of forgetting to register - and therefore illegally distributing - 23 million shares, and violating an SEC "no talking" period by giving an interview to Playboy before filing the paperwork to go public. The SEC is inquiring into both situations.

"It's almost like a conspiracy," said analyst Gene Walton of Walton Holdings LLC in New York. "If anything goes wrong, let's make sure it's highly publicized."

Founded in 1998, Google built its reputation on its advanced search engine technology. Its Web site is uncluttered, the results solid and the number of pages searched more than any other engine.

"The hype about it comes from a couple of things. One is that Google is genuinely popular," said Derek Bambauer, a fellow at the Berkman Center for Internet & Society at Harvard Law School.

People like it because it returns the most relevant results, separates out paid advertising and provides a streamlined interface that loads quickly.

It's a formula that seems to work. Bambauer said Microsoft's demo Web site for its coming search engine "looks almost exactly like Google's."

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