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Wed, Jul 28, 2004 - Page 12 News List

Google details plans for its IPO

MARKET CAP The Internet search giant will, if things go according to plan, find that its valuation puts it in the same major league with the likes of McDonald's and Sony

AP , SAN JOSE, CALIFORNIA

Internet search leader Google Inc detailed its highly anticipated public stock offering (IPO) with an estimate that its market value will be as high as US$36 billion, which would rival corporate stalwarts such as McDonald's Corp and Sony Corp.

Google said 24.6 million shares will be sold for US$108 to US$135 each, depending on the unusual auction Google plans to employ as early as next month, according to a regulatory filing.

That would mean that between US$2.66 billion and US$3.32 billion in stock would be sold in the IPO. However, the amount the company itself expects to raise is around US$1.66 billion, because 10.5 million of the shares being offered are being sold by existing stockholders.

It would be the eighth-largest IPO in history, bigger than most that took place during the 1990s dot-com boom. Unlike those companies, however, Google has consistently been profitable and has posted steep revenue increases.

But while this IPO will be big, it's not expected to generate the kind of hysteria that surrounded tech offerings in the 1990s, when companies like Netscape Communications, Pets.com and Webvan.com saw their stock soar despite a lack of profits and, in many cases, questionable business models.

"There are no virgins anymore when it comes to Internet investing. People have seen the upside as well as the down," said Barry Randall, a manager at US Bancorp Asset Management in Minneapolis.

"All investors -- whether institutional or individuals -- are far more savvy about what's possible as an Internet company," he said.

Google, which is offering just 9 percent of its stock, would have a market capitalization -- a company's total value -- between US$29 billion and US$36 billion. The average in the S&P 500 is US$21.25 billion. Rival Yahoo Inc. has a market cap of nearly US$38 billion.

Once shares begin trading on the NASDAQ, Google expects to have the ticker symbol "GOOG."

Google shares will be distributed in an auction designed to give the public a better chance to buy stock before shares begin trading. In the past, companies' IPO shares have been restricted to an elite group picked by bankers handling the deal.

Analysts expressed some surprise that the search behemoth -- given its "Do No Evil" mantra and its desire to democratize the IPO process -- is not going to split its stock to bring the price range down to levels more appealing to average investors.

Once issued, Google stock could be volatile, though analysts are debating whether the high initial price or the auction format might result in swings in either direction after public trading has begun.

Because the auction is set up to determine the price most people are willing to pay for the stock, theoretically few people would want to buy shares at a higher price in the first few days or weeks after they begin trading.

The scenario could cause IPO bidders to worry they overpaid for Google's stock and prompt a wave of selling that drives down the price, a phenomenon known as the "winner's curse."

Google founders Larry Page and Sergey Brin, who developed the search engine and formed the company in 1998, stand to profit handsomely, along with Google's stockholding employees and venture capital investors.

Google's filing with the Securities and Exchange Commission gave an updated picture on the company's booming growth, fueled almost entirely by advertising linked to online searches.

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