Google IPO
Tim Mulrooney
Jim Gipson
Background Info
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Founders Larry Page and Sergey Brin
Met in 1995 when they were doctoral
students in computer science at Stanford.
Launched Google in September 1998 in a
friend's garage in Menlo Park, Calif.
Named the company after the
mathematical term "googol," which
stands for a 1 followed by 100 zeros.
Google Facts
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In 2003, employed 1,907 employees,
more than sixfold the number in 2000.
Generates 95 percent of its revenue from
advertising.
Had an audience of 60 million unique
visitors, or 40 percent of all U.S. Internet
users.
Income Statement
Filing for IPO
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Very private about company finances
2003
 Earned $105.6 million on revenue of
$961.8 million
 Operating profit margin of $571.8
million.
2004
 Earned $63.9 million on revenue of
$389.6 million in first quarter.
July 26, 2004
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Google files IPO with SEC
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August 13, 2004
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Seeking to raise $2.7 billion
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Selling 24.6 million shares
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271 million shares outstanding
About 9% of total shares
July 26, 2004
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Underwriters:
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Predicted share price:
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Morgan Stanley and Credit Suisse First
Boston
Between $108 and $135 each
Eighth largest IPO in history
Predicted Market Cap
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$108 – $135 * (24.6)
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$2.66 - $3.32 billion
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9% of total market cap
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$29 - $36 billion
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S&P 500 average - $21.25 billion
Auction Process
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“Modified Dutch Auction”
A different IPO for a different
company.
Democratize availability of stock:
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Reform original IPO process of allowing
Wall Street to give large allocations to
favored customers.
Dutch Auction
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Intended to ensure the distribution
of shares to investors whose bids
are at or above the price that clears
all shares in the deal.
Similar to how the US Treasury
raises funds for our government.
FED needs to raise $7 billion for US
Treasury
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$0.5
$1.5
$2.5
$4.0
$3.5
$2.0
B
B
B
B
B
B
@
@
@
@
@
@
5.310%
5.315%
5.320%
5.325%
5.330%
5.335%
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All investors will
receive a yield of
5.325%
Leads to more
aggressive
bidding. Investors
at the top will get
a better deal than
they bargained for.
Aug 13, 2004
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No IPO…
Delayed a week because of logistics
details. Couldn’t enter everybody in
the auction system.
Morgan Stanley - “This is all new to
us, but we just hit a speedbump”
August 18, 2004
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Google stock (GOOG) opens at
$100.01, after being priced at
$85.00
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lower than original ($108 - $135)
# shares offered: 19.6 million
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Much less than original (25.7 million)
August 18, 2004
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Total revenue:
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Actual revenue raised from IPO:
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19.6 million shares * $100 = $1.96 B
$1.67 B
Why? Some shares sold were already
held by employees.
Many Google employees became
instant millionaires
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Approximately 250 million shares
for nearly 2,000 employees.
Average:
(250,000,000 shares * $100 / 2,000 employees)
$12.5 million / employee
Today
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GOOG - $458.16
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Long run investors? - $$$
# shares outstanding = 311 million
Market Cap - $142.47 billion
End of year 2006
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Revenue - $10,604,917,000
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Net Income - $3,077,446,000
PVGO – 100%
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Google has not and does not plan to pay any cash
dividends in the future.
Google ideals – changing after IPO?
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Rich employees
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Workforce tensions
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"Once a person has the sense of the
wealth, the commitment to the company
and where it's going can fall off"
Only about 1,000 employees became
millionaires
Loss of control
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Newfound responsibility to shareholders
Employees are still selling off their shares
(class A)