SAN JOSE, Calif. – Google Inc. dramatically lowered expectations for the Internet search giant’s value Wednesday ahead of its much ballyhooed coming out party in the public markets. The offering is still one of the biggest and most highly anticipated for an Internet company, surpassing the hot issues of the dot-com boom.
The world’s most popular search engine said Wednesday it now expects its stock to sell for $85 to $95 a share, down nearly a third from its previous forecast of $108 to $135. It also said the total number of shares sold will be cut to 19.6 million from 25.7 million.
Google closed the unorthodox auction to set its initial stock price Wednesday after receiving final approval by the Securities and Exchange Commission to proceed with the long-awaited sale.
Before trading begins, probably today, the company and its underwriters had to announce the share price of the initial sale, notify winning bidders and allocate shares. That was expected to occur late Wednesday.Google would raise $1.86 billion if the final stock price is set at $95, rather than the $3.6 billion it initially hoped to raise. Google’s market capitalization at $95 a share would be less than $26 billion, down from the original high-end estimate of $36 billion.
Investors who bid above the selling price will only pay the per-share IPO price. If there’s demand for more than the company’s 19.6 million shares, successful bidders may get just a percentage of what they requested.
Once the price is set and the initial shares sold, the stock could begin trading, possibly as early as Thursday morning, under the symbol “GOOG” on the Nasdaq Stock Market.
The bumpy IPO process has created several clouds over the company, which has been criticized for being too idealistic, arrogant and reckless since it began the IPO process four months ago.
Its prospectus indicates that Google still faces regulatory questions. In one case, it said the SEC “has requested additional information concerning the publication” of an interview of Google founders Sergey Brin and Larry Page that appeared in September’s issue of Playboy magazine. That was a potential violation of the SEC’s rules against talking publicly before an IPO about information that is not included in the prospectus.
Google also has admitted that the agency has launched an informal inquiry into its issuance of millions of pre-IPO shares and options without registering them.
The auction – another source of controversy – was supposed to democratize the IPO process, which is usually limited to investors connected to investment banks. However, many analysts questioned whether Google’s projected price was affordable to average investors.
Before the surprise announcement early Wednesday, first announced in an e-mail to potential investors, some observers had questioned whether Google’s triple-digit price estimate was realistic, given the rocky stock market conditions in recent weeks. Several companies, in fact, have delayed or abandoned plans to go public.
But Google until Wednesday surprised many by bucking the market trends for so long. In fact, it has repeatedly been a source of surprises since it announced its public stock offering in April.
It eschewed Wall Street tradition and decided that the final IPO price would be set by an auction. Its founders wrote an idealistic letter in its prospectus, outlining the company’s “Don’t Be Evil” mantra, and plan to avoid the trappings of traditional companies.
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