Google Founders, Larry Page & Sergey Brin
Today, Google founders, Larry Page and Sergey Brin announced that the Internet search company they founded in 1998 is preparing for a Dutch Auction IPO rather than the traditional Wall Street route through investment banks. The offering is expected to take place by late summer or early fall.
Page and Brin, together with Google Inc.'s fellow Directors, Chairman & CEO, Dr. Eric E. Schmidt, Kleiner Perkins Caufield & Byers' John Doerr, Sequoia Capital's Michael Moritz, and Sherpalo's Ram Shriram have selected Morgan Stanley and Credit Suisse First Boston as the company's underwriters.
Morgan Stanley and First Boston will receive 3 percent, or $81 million, of the total offering rather than the 7 percent investment banks typically charge. Google figures the road show and investor pitch is unnecessary, since everyone already knows who they are. (Google is one of the world's best-known brands, with an online search engine that processes more than 200 million queries daily.)
Savings: over $100 million and significant distractions now that management won't be going on the traditional road show.
While WR Hambrecht pioneered the Dutch Auction concept, Morgan Stanley and First Boston must play catch-up in order to be ready to raise $2.7 billion. The two companies have been working for three months creating the software.
One of the most interesting aspects of Google's SEC filing is that it leads off with a letter from the founders, Larry Page and Sergey Brin.
The letter begins by saying, "Google is not a conventional company. We do not intend to become one."
Consistent with that philosophy, here's what Page and Brin had to say about the auction:
Informed investors willing to pay the IPO price should be able to buy as many shares as they want, within reason, in the IPO, as on the stock market.
It is important to us to have a fair process for our IPO that is inclusive of both small and large investors. It is also crucial that we achieve a good outcome for Google and its current shareholders. This has led us to pursue an auction-based IPO for our entire offering. Our goal is to have a share price that reflects a fair market valuation of Google and that moves rationally based on changes in our business and the stock market. (The auction process is discussed in more detail elsewhere in this prospectus.)
...
An auction is an unusual process for an IPO in the United States. Our experience with auction-based advertising systems has been surprisingly helpful in the auction design process for the IPO. As in the stock market, if people try to buy more stock than is available, the price will go up. And of course, the price will go down if there aren’t enough buyers. This is a simplification, but it captures the basic issues. Our goal is to have an efficient market price -- a rational price set by informed buyers and sellers -- for our shares at the IPO and afterward. Our goal is to achieve a relatively stable price in the days following the IPO and that buyers and sellers receive a fair price at the IPO.
We are working to create a sufficient supply of shares to meet investor demand at IPO time and after. We are encouraging current shareholders to consider selling some of their shares as part of the offering. These shares will supplement the shares the company sells to provide more supply for investors and hopefully provide a more stable fair price. Sergey and I, among others, are currently planning to sell a fraction of our shares in the IPO. The more shares current shareholders sell, the more likely it is that they believe the price is not unfairly low. The supply of shares available will likely have an effect on the clearing price of the auction. Since the number of shares being sold is likely to be larger at a high price and smaller at a lower price, investors will likely want to consider the scope of current shareholder participation in the IPO. We may communicate from time to time that we would be sellers rather than buyers.
We would like you to invest for the long term, and to do so only at or below what you determine to be a fair price. We encourage investors not to invest in Google at IPO or for some time after, if they believe the price is not sustainable over the long term.
We intend to take steps to help ensure shareholders are well informed. We encourage you to read this prospectus. We think that short term speculation without paying attention to price is likely to lose you money, especially with our auction structure.
We applaud Google for taking this innovative approach that will provide an equitable means for distributing its shares.
About Sergey Brin
Sergey Brin, a native of Moscow, received a bachelor of science degree with honors in mathematics and computer science from the University of Maryland at College Park. He is currently on leave from the Ph.D. program in computer science at Stanford University, where he received his master's degree. Brin is a recipient of a National Science Foundation Graduate Fellowship as well as an honorary MBA from Insitituto de Empresa . It was at Stanford where he met Larry Page and worked on the project that became Google. Together they founded Google Inc. in 1998, and Brin continues to share responsibility for day-to-day operations with Larry Page and Eric Schmidt.
About Larry Page
Larry Page was Google's founding CEO and grew the company to more than 200 employees and profitability before moving into his role as president, Products in April 2001. He continues to share responsibility for Google's day-to-day operations with Eric Schmidt and Sergey Brin.
The son of Michigan State University computer science professor Dr. Carl Victor Page, Page's love of computers began at age six. While following in his father's footsteps in academics, Page became an honors graduate from the University of Michigan, where he earned a bachelor of science degree in engineering, with a concentration on computer engineering. During his time in Ann Arbor, Page served as president of the University's Eta Kappa Nu Honor Society and built a programmable plotter and inkjet printer out of Lego™.
While in the Ph.D program in computer science at Stanford University, Page met Sergey Brin and together they developed and ran Google, which began operating in 1998.
When you "google" Larry Page, Google's founder & President of Products, two sponsorship links come up: one promotes the fact that the company is hiring in India; the other touts the fact that they are hiring expert computer scientists and software developers. Get your resume in now, if you fit either of those profiles because Larry Page may want you.
The company's founders are the largest stockholders in the company. Page holds 38.6 million shares, and Brin holds 38.5 million shares. Together, their Class B stock represents nearly 33 percent of the company. Whereas they will be selling Class A common stock to the public, their Class B stock provides them with ten times the voting power. This gives them significant control as they steer ship into the future.
We are thrilled that Google is going public.
Two of our online publications, The Rugged Elegance Inspiration Network and RE: San Francisco, are among over 4,500 official news sources selected by Google News.
The Google search engine has tremendous mindshare within the community of "rugged elegant" establishments we serve. However, not everyone knows about the power of Google News or Google News Alerts, which are excellent ways to stay on top of breaking news of interest. With more resources in their pockets, hopefully Google will begin to market this valuable service to an even broader audience."
As a publisher, there is no better way to get story ideas than from Google News Alerts.
For years, as we built BioSpace, PR Newswire was a primary source of content along with 750 media sources we aggregated content from worldwide.
However, today -- as we build The Rugged Elegance Inspiration Network, RE: San Francisco and our ChangeMariner.com weblog (aka "blog") focused on economic, political, social and technological change -- we are relying exclusively on press releases from our customers along with Google News Alerts.
Sergie and Larry, you are like rock stars in our world.
We will be living vicariously through you as you continue to successfully execute on your ever-evolving vision.
With your A Class venture capitalists and underwriters, and your dream Board of Directors and management team, we hope your wildest dreams come true.
Inspire & Be Inspired.
~Jennifer King
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