SAN JOSE, Calif. – In the most highly anticipated Wall Street debut since the heady days of the dot-com boom, shares of Google surged nearly 20 percent on their first day of public trading Thursday as the quirky Internet company completed its much-hyped initial stock offering.
Despite the first-day jump, the debut generated much less money than the company envisioned after it launched an unorthodox auction designed to open the stock beyond large investors who typically get first crack at new stock issues.
Google shares finished the day at $100.34, up 18 percent, and the stock offering raised $1.67 billion. The company originally hoped to open at between $108 and $135, generating as much as $3.6 billion and making the company worth up to $36 billion.
“If it’s not a failure, it clearly didn’t work the way Google’s management intended it,” said Barry Randall, portfolio manager for the First American Technology Fund.
Still, Google had a market value of $27.2 billion after its first day of public trading – on par with General Motors Corp.
The IPO also brought instant riches to hundreds of employees of a company that was dreamed up in a college dorm room in 1998 but soon became synonymous with Internet searches. In true dot-com fashion, a scheduled summer picnic planned today near Google’s Mountain View headquarters is expected to turn into an IPO party.
About 1,000 of Google’s nearly 2,300 employees are now millionaires on paper, according to an analysis by Salary.com, which tracks employee compensation.
“There are going to be some pretty good parties in the Bay Area this evening – probably not a lot of work getting done at Google tomorrow,” said Bill Coleman, the firm’s senior vice president of compensation.
The offering also made co-founders Sergey Brin and Larry Page billionaires – at least on paper. From share sales in the IPO, Page collected $41.1 million and Brin $40.9 million, but that pales in comparison to the more than $3 billion each still holds in Google shares.
Celebrations are likely to be more muted in the offices of Google’s underwriters, who will share just $46.7 million for handling the stock offering, according to a filing Thursday. That’s a 2.8 percent commission, less than half of the typical 7 percent they usually receive.
Google’s price was set Wednesday after the close of an unusual auction in which would-be investors bid how much they thought the search engine was worth. All winning bidders paid the same price – one that guaranteed the sale of all 19.6 million shares.
Though the so-called Dutch auction was designed to open the IPO beyond large investors, that is not what happened, said David Garrity, a technology analyst in New York with Caris &Co.
Investors needed large bank accounts to qualify for the auction, and international investors were barred from participating. And others might have been scared by Google’s initial per-share price estimate.
“It was supposed to democratize the process and let people buy in at just a few shares, but it was a miserable failure because the organizers didn’t realize the securities regulations that require people who bid to have a certain net worth,” said David Garrity, a technology analyst in New York with Caris &Co.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
