Founders' Interview Clouds Google Share Auction
The Mountain View, CA, company said it and its underwriters expect the share auction to close sometime this week with a set price for the IPO. Under the unusual stock auction, Google can stop the bidding at any time. The stock sale could net up to $3.5 billion, based on Google's estimate of what its shares are worth.
In a Securities and Exchange Commission filing made just before the auction began, Google warned that an interview founders Sergey Brin and Larry Page gave to Playboy a week before Google filed for its IPO could have violated an SEC rule. The company said it did not believe the interview was a violation. But if a court found it broke SEC "quiet period" rules, Google could be forced to buy back the shares at the offer price. The filing said Google would "contest vigorously" such action.
The interview could constitute a violation of Securities Act rules that prohibit a company from talking up its IPO in the media. The SEC recently forced Salesforce.com to delay its IPO because of comments its CEO made in a New York Times interview. The Salesforce.com delay lasted six weeks after the story was published.
In the Playboy interview, Brin and Page do not divulge new information about the company's plans. However, they discuss new business areas for the company, such as its Gmail service.
In its SEC filing, the eighth change it has made since its initial filing April 29, Google corrected three points in the Playboy article. The interview states that Gmail offers 200 times the storage of competitors. Though true at the time, Yahoo and Hotmail have moved to narrow that gap considerably. Playboy also puts Google's headcount at 1,000, which was the company's standard estimation of its employee base prior to its IPO filing. Since then, Google has revealed that its headcount is about 2,292. The Playboy article also states that Google draws 65 million users daily. However, this is a monthly figure.
The question of whether the Playboy interview will delay Google's IPO is the latest roadblock for the share offering. Professional investors panned its road show for its lack of financial disclosures. Some also complained about the mechanics of its share auction and the company's estimated $108-$135 price range for its shares. Google also revealed that one of its executives, David Drummond, is under SEC investigation involving conduct at a previous job, and Google could face lawsuits for failing to properly register stock issued prior to its public offering.
A delay could benefit Google's offering, since the stock market has soured on shares of Internet-related companies. On Thursday, adware maker Claria scrapped its planned $150 million IPO, and gay community site PlanetOut postponed its $75 million offering.