Some stuff about Google’s IPO

Yeah I know, I shouldn’t be posting this, but I will just be doing this for myself as for everybody else here. I’ll just put interesting bits from different articles to be sure I have somewhere to go back to for more info. So here it goes for the Google IPO. I will update this during the day.

SEC filing is here.

_Another flourish involves the company’s allegiance to its geeky roots: The amount of the $2.7 billion offering contains an inside joke for the math-minded. The exact offering, $2,718,281,828, is the product of “e” and $1 billion, where “e” is the base of the natural logarithm — a logarithm especially useful in calculus — and equals 2.718281828…._ source

The IPO will be auction-based!

_Although Google named two investment bankers in its filing, the IPO process itself will be auction-based.

[…]

Shares in the company held by executives and top investors as of March 31, 2004, were: Page, 38.6 million; Brin, 38.5 million; John Doerr, 24 million; Michael Moritz, 24 million; Sequoia Capital, 23.9 million; Kleiner Perkins Caufield & Byers, 23.9 million; and Schmidt, 14.8 million._ source

Salaries are:

_Brin, president of technology, earns $150,000 with a bonus of $206,000; and Page, president of products, earns the same as Brin. Omid Kordestani, senior vice president of worldwide sales, makes $175,000 annually, with nearly $400,000 in bonuses. Wayne Rosing, vice president of engineering, earns $175,000 annually, with $150,000 extra.

Schmidt earns $250,000 annually with a bonus of $300,000. He has the right to purchase 14.3 million common shares at a purchase price of 30 cents; and another 426,000 preferred shares at $2.34._ source

Here are some of the things they are saying they will do:

_Managing Wall Street: “Many companies are under pressure to keep their earnings in line with analysts’ forecasts. Therefore, they often accept smaller, but predictable, earnings rather than larger and more unpredictable returns. Sergey and I feel this is harmful, and we intend to steer in the opposite direction.”_ source

Wonderful. I congratulate them, but it will be interesting to see if it works.

_Dual class voting: “While this structure is unusual for technology companies, it is common in the media business and has had a profound importance there. The New York Times Company, the Washington Post Company and Dow Jones, the publisher of The Wall Street Journal, all have similar dual class ownership structures. Media observers frequently point out that dual class ownership has allowed these companies to concentrate on their core, long-term interest in serious news coverage, despite fluctuations in quarterly results._ source

This will actually help them with the above point. They will retain more power and they can live with share price fluctuations if they pull it through.

Last quarter Numbers:

Net Income: $64 million

Net Income per Share: 42 cents

Revenue $389.6 million

Employees: 1907

(source)

From the SEC Filing:

Shareholders Equity: $727,780,000

Cash: $454,888,000

_We have regularly paid refunds related to fraudulent clicks and expect to do so in the future. If we are unable to stop this fraudulent activity, these refunds may increase. If we find new evidence of past fraudulent clicks we may have to issue refunds retroactively of amounts previously paid to our Google Network members.”_ source

This is important to remember! The danger here is huge.

_“We have never declared or paid any cash dividend on our capital stock. We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future.”_ source

They better grow faster than market growth.

_The company released the prices of its search appliances in the filing. The search appliances allow businesses to perform Google-like searches on their own networks. The three models cost $32,000, $230,000 and $600,000._ source

Update: _The sick thing is that he could have written anything in that prospectus and people would still be begging him for shares._ Google Finally Files by Erick Schonfeld. Erick also has the link to the Bershire Hathaway Owner’s Manual which Google is referring too. The general yearly reports from Bershire Hathaway are a must read for a new investor by the way.

Update: John Battelle was on Talk of the Nation about the Google IPO on the 27th of April and you can listen to the show right here. source.

Also very interesting are the 10 things you didn’t know about Google from Red Herring. This includes stuff like:

_Networking skills: The Google Network – the collection of outside Web sites the company provides advertising and search services to – is becoming more important. These sites accounted for 21 percent of Google’s revenues in the first quarter of 2004, up from 15 percent in 2003._

and

_9.      Mismatched?: Some partnership deals could be costing Google. Agreements with “a small number� of sites guarantee them a negotiated minimum fee. If Google makes less money from these partnerships than the minimum it agreed to pay, it has to eat the difference. In 2003, this cost Google $22.5 million in cost of revenues related to specific deals where it lost money._

The thing there is that Google starts to need space on other sites to make their far over 100.000 advertisers happy. They need more traffic and they need to pay for that. Other people will pay for traffic too though and on top of that, sites might be reluctant to sell their space for the money that Google is willing to pay.

_10.  Patent squabbles: In 2002, Overture Services (which is now owned by Yahoo) sued Google, claiming that its AdWords program infringes on certain claims of an Overture patent. The case is yet to be decided._

The Google Doubletalk article on Red Herring also talks a bit about the different voting rights shares will have. The problem with this is really that it gives a lot less rights to the owners of the business. It puts the power into managents hands, which is something that goes a little bit again the shareholder value mantra that is so common in the US. I am not saying it is bad, it will just be interesting to watch.

Ross Mayfield is thinking about whether Google will do a Direct Public Offering, which could potentially go as far as to Google being the market where the shares are traded, being quasi public, but also closed, kind of. I am not sure if Ross has gone as far in his thinking but things are still interesting out there.

Also notice the Google Blog! ;) (source)

Some interesting bits from the S-1 filing are here, which goes on mostly about problems attached to AdWords, AdSense, and the like.

A bit of stuff about the online auction model and the Google IPO is here at the NY-Times.

Also, Jeremy is talking about some questions that the SearchEngineJournal asked here, putting forward some interesting points. I commented a bit on his site.