Google and Yahoo Settle Dispute Among IPO Plans
Yahoo Inc. and Google Inc. today announced that the companies have resolved two disputes that have been pending between the companies. Under the terms of the settlement agreement, Google will take a license to U.S. Patent No. 6,269,361 and several related patents, held by Yahoo!’s wholly-owned subsidiary, Overture, and Yahoo! dismissed its patent lawsuit against Google. The two parties have also resolved a dispute regarding shares issuable to Yahoo! pursuant to a warrant to purchase Google shares in connection with a 2000 services agreement.
In connection with the settlement of the warrant dispute, the patent lawsuit, and in payment for the license, Google issued shares of its Class A common stock to Yahoo!
Google increased the number of shares it will offer in an widely expected initial public offering later this month, to 25.7 million from 24.6 million, with the extra shares allotted to Yahoo in order to pay for a technology license used to display ads alongside search results, Google’s main source of revenue.
As a result of the settlement, Google said it will post a net loss in the current quarter to September, due to a noncash charge of between $260 million and $290 million.
Internet portal Yahoo will sell most of its shares from the settlement, worth as much as $149 million at the high end of Google’s expected IPO price range, leaving it with a 4.1 percent stake in Google, according to an amended filing made with the Securities and Exchange Commission.
Yahoo was an early investor in Google, its closest rival, and will also hold 4.95 million super-voting Class B shares, a 2.1 percent stake, after the IPO.
Google IPO Delayed
News Interactive reports that a technology problem prevented Google opening on time a website where institutional investors could register to bid, delaying the issue by nearly a week. As a result, the auction is not expected to be held until next week even though the second half of August is traditionally a very quiet period for the stock market.
Google’s error in filing the additional 28 million IPO’s was reported in a Securities and Exchange Commission filing, and relates to over 23.2 million shares of common stock and 5.6 million outstanding stock options that the company has issued to employees and consultants. Google did not register those stocks with securities regulators, which can violate federal securities laws.
CNBC adds “Part of the problem, the person said, was that Google’s IPO, which is being led by Morgan Stanley and Credit Suisse Group’s Credit Suisse First Boston, is being run through an auction format that had never been tried before. “It’s all new,” the person said. “We just hit a speedbump.”
Google’s planned mid-August IPO, which is being conducted through an auction process, might raise as much as $3.3 billion. Although according to the WSJ, Google’s unorthodox IPO bidding may be scaring some investors away; “Some institutional investors, including mutual funds and hedge funds, are reluctant to bid a high price for the IPO, which may be starting between $108 and $135.”