Upon going public with its business revenue while filing for an IPO yesterday, Google – an extraordinary company, plans to open its initial public offering in an extraordinary way. Google detailed its plans for a Dutch Auction in its S-1 filing to the Security Exchange Commission yesterday.
Google intends to manage a Dutch Auction for the initial buying of its shares. Now the “Average Joe” and not just big investment institutions will be able to buy shares directly from an underwriter.
The Google Auction should also end with many advantages for the Google company and its current handfull of share holers. According to the Wall Street Journal, the public auction could give Google a better opening price for its shares, and bring it, not Wall Street, more money for its efforts.
An auction also should reduce the fees Google pays to securities firms, such as lead underwriters Morgan Stanley and Credit Suisse First Boston.
“It’s a 100% better mousetrap,” said Patrick Bryne, president of Overstock.com Inc., which used an auction to go public in 2002. “It was one of the smartest decisions we ever made.”
Such auctions have been pioneered by W.R. Hambrecht & Co., the San Francisco investment bank run by longtime banker Bill Hambrecht. For years, Hambrecht has been the only firm doing such deals, but, ironically, the bank isn’t listed as an underwriter for the Google deal. That could change as Morgan Stanley (MWD, news) and Credit Suisse add co-managers to the offering.
The San Francisco Gate also reports that Google plans two different classes of shares, which may worry some investors.
Brin and Page are taking another unusual step with their IPO – creating two classes of stock, one consisting of shares already held by company insiders and another for outside shareholders who acquire their stake through the IPO. The insider shares, which are known as “Class B” shares, will contain 10 times the voting power of the “Class A” shares that will be sold in the IPO. That ensures that company insiders will retain control.
Some corporate governance experts contend that this two-class system could serve outside shareholders poorly.
Here is what Google has to say about their IPO Dutch Auction, excerpt from the IPO filing with the SEC.
The auction process being used for our initial public offering differs from methods that have been traditionally used in most other underwritten initial public offerings in the United States. In particular, the initial public offering price and the allocation of shares will be determined primarily by an auction conducted by our underwriters on our behalf. We plan to conduct this auction in five stages—Qualification; Bidding; Auction Closing; Pricing; and Allocation.
The Qualification Process
Our objective is to conduct an auction in which you submit informed, rather than speculative, bids. Before you can submit a bid, you will be required to qualify by obtaining a unique bidder ID and by meeting an underwriter’s account eligibility and suitability requirements. Your unique bidder ID will be issued electronically only after you have accessed an electronic form of this prospectus, including the transcript of the presentation by our management team that will be contained in this prospectus, and only after you have provided identification information.
The Bidding Process
Approximately ____ days after the date on the cover of this prospectus, all investors that have qualified to bid may submit bids indicating their interest in our offering through one of our underwriters. In connection with submitting a bid, you must provide the following information:
* The number of shares you are interested in purchasing.
* The price per share you are willing to pay.
* Additional information to enable the underwriter to identify you, confirm your eligibility and suitability for participating in our initial public offering, and, if you submit a successful bid, consummate a sale of shares to you.
Bids may be within, above or below the estimated price range for our initial public offering on the cover of this prospectus. You may submit more than one bid. The minimum size of any bid is __ shares.
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston LLC
Many of these underwriters have the ability to receive bids from their customers over the Internet, and all can receive bids from their customers by telephone or facsimile. To participate in the auction for our initial public offering, our underwriters will require that you agree to accept electronic delivery of this prospectus, any amended prospectus and the final prospectus. If you do not consent to electronic delivery, or subsequently revoke that consent, you will not be able to submit a bid or participate in our offering.
If you are interested in submitting a bid but do not currently have a brokerage account with any of the underwriters named above, you may contact one of these underwriters to inquire about opening an account and submitting a bid. You should be aware that, due to each underwriter’s requirements for new customer accounts, you may not be able to open an account with a particular underwriter. Even if you are a customer of one of our underwriters, and even if you have received a unique bidder ID, you may not be permitted to submit a bid due to legal requirements.
As more information on the web site for registering for the Google IPO Auction and a specific IPO filing date comes into play, the Search Engine Journal will report such news to our readers.