SAN JOSE, Calif. – Internet search leader Google Inc. detailed its highly anticipated public stock offering Monday with an estimate that its market value will be as high as $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 $108 to $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 $2.66 billion and $3.32 billion in stock would be sold in the initial public offering. However, the amount the company itself expects to raise is around $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 ’90s, when companies such as 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, portfolio manager of the First American Technology Fund 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 $29 billion and $36 billion. The average in the S&P 500 is $21.25 billion. Rival Yahoo Inc. has a market cap of nearly $38 billion.
Once shares begin trading on the Nasdaq Stock Market, Google expects to have the ticker symbol “GOOG.”
Google shares will be distributed in an auction designed to give the general 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 investment 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.
“I think that’s a little bit ridiculous,” said Paul Bard, an analyst at Renaissance Capital in Greenwich, Conn. If individual investors have $100 they want to invest, “they’re not even going to get a single share.”
Google executives appear to be following in the footsteps of star investor Warren Buffett, who has called splits a Wall Street gimmick. Class A stock of his Berkshire Hathaway Inc. has never split and it now trades at about $88,000 per share.
Google founders Larry Page and Sergey Brin, who developed the search engine in a Stanford University dorm room and formed the company in 1998, stand to profit handsomely, along with Google’s stock-holding employees and venture capital investors.
Page and Brin will each sell about 1 million of their shares, generating about $117 million for each based on the midpoint of the company’s range, $121.50 per share. They will each still own more than $4.5 billion worth of stock, and their preferred shares will carry more voting power than the publicly traded stock.