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Google's follow-on offering nets billions

GOOD TIMES Investors jumped at the opportunity on Wednesday to grab more of Google's skyrocketing stock, buying 14.2 million shares for a total of US$4.18 billion

NY TIMES NEWS SERVICE , NEW YORK

Google raised US$4.18 billion on Wednesday night in a secondary offering, as investors tried to add to their holdings of a stock that has more than tripled since the company's initial offering a year ago.

Google's follow-on offering, in which it sold 14.2 million shares at US$295 each, was completed less than one month after it filed to sell 14.159 million shares (a number that matches the digits of the mathematical term pi with the initial 3 removed).

Google held an abbreviated road show, meeting with investors in a few cities, culminating with a lunch at the St. Regis Hotel in New York on Wednesday.

The secondary offering appeared to be as smooth as Google's initial offering was tumultuous. When it went public, the company chose an unusual computerized auction process that confused many potential investors.

Its prospectus was filled with unusual phrases, like the company's credo: "don't be evil."

Its road show had so little information that some investors were offended. Ultimately, the offering was completed at US$85 a share, raising US$2 billion, much less than the company had initially hoped for.

The secondary offering, by contrast, was a traditional one in which sales representatives from brokerage firms took orders from investors, largely by telephone. And its prospectus had less bravado and only the typical warnings and disclosures.

"It's refreshing," said Jordan Rohan, an analyst at RBC Capital Markets, talking about Google's newfound conventional approach to raising capital. "They have changed the rules for information retrieval, but it's hard to change the rules on Wall Street."

Google's shares have skyrocketed since its initial offering, largely because the company has grown faster and become much more profitable than investors had expected.

The follow-on offering price of US$295 was slightly less than the US$303 that Google's shares closed at on Wednesday.

Such a discount is traditional when a company is trying to sell a large block of stock at one time. Indeed, this was the largest follow-on stock offering in at least a decade.

Google's shares had risen sharply from US$280 on the day the offering was announced to US$311.68 on Tuesday, leading some to speculate that Google's meetings with investors, which were closed to the public, offered new optimistic hints of Google's prospects.

William Harnish, the chief executive of Peconic Partners, a New York hedge fund that owns Google shares, said he attended Google's presentation at the St. Regis and saw nothing new.

"It was typical Google name, rank and serial number," Harnish said. "In terms of information that is new or different, there was none."

He said that about 300 people attended the meeting, hardly filling the 20th-floor ballroom. Google did agree to have one-to-one meetings with some large investors, something it has refused to do over the last year.

Despite the lack of new information, Harnish said he hoped to buy shares in the offering to add to Peconic's holdings.

He said that Google was largely coy about what it planned to do with the money it raised.

"The only thing they said is they have no plan for what to do with the cash at this time," he said.

In the company's prospectus, it said it would use the money for "general corporate purposes" and possibly acquisitions.

Google did show a slide that compared the US$7 billion in cash it will have after the offering with the cash balances of its major rivals. Yahoo currently has about US$4 billion in cash, while Microsoft has US$49 billion.

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