Google IPO

Case Study Presentation

Oct. 13, 2004
Amy Black, Matt Dormer,
David Marsden, Yugo Watanabe

101304Google_2
 Agenda
• Traditional IPO

• Dutch Auctions (reverse auction)

• Examples of other Dutch Auction

• Was the IPO successful?

 Traditional IPO
• First sale of publicly traded stock

• Private vs Public

• IPO Specialists

• Regulated by the SEC

 Dutch Auction
• Overview of Dutch (Reverse) Auction Process

- Company determines amount of stock and price range

- Buyers place bids and price goes down until stock is sold

• Goals of Dutch Auction

- Open up offering to Individual investors
- Lower fees paid to Investment Banks
- Reduce volatility
- Google saw themselves at the frontier of technology
 Dutch Auction
• Snapshot at Google’s IPO
- 25.7 M shares originally priced at $108-135/share
- Actual IPO priced 19.6 M shares at $85-95/share

• Hybrid Auctions May become the norm

 Other Dutch Auctions

• Since April 9, 1999, 9 companies have used

the Dutch auction system to go public

• Before Google, only one reduced its

offering price (Peet’s Coffee)

• Reducing an IPO’s price is not unusual

 Other Dutch Auctions
• Two companies priced their offerings
higher than the initial price

• Alibris was the only Dutch auction to be

withdrawn
 April 29 July 30 Aug. 12 13 Aug. 17

Filed IPO Registration Period

Auction Period
Excitement for potential to Skepticism; technical issues
reinvigorate the tech-market (too expensive & cumbersome)

Aug. 19 Oct. 12

Trade Begin Last Trade 136.66

1st Day Nasdaq Trading
$85 ⇒ 　 $100.34 +18%
 Was the IPO successful?
Achieved primary purpose of an IPO.

• Raised $1.7 billion

- more than any other tech company since 2000

• Gave stock valuation of $23 billion

- more than double the market value of Sears
- worth more than AT&T corp., Xerox Corp. and
RadioShack Corp. combined.

The Washington Post Aug. 19, 2004

Los Angeles Times Aug. 20, 2004
 Was the IPO successful?
• First- day “pop”
- 1990 ~ 98, historically 15 % average
- bubble of the late 90’s
⇒ 　 First day gains averaged 65%

• Banker Fee
- as much as 7% of the money raised

The San Francisco Chronicle Aug. 22, 2004

Los Angeles Times Aug. 19, 2004
Oct. 12, 2004: Last Trade 136.66