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(Harvard Business Review)   SEC rule may force a Google IPO by April 30   (siliconvalley.com) divider line 46
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13350 clicks; posted to Main » on 19 Apr 2004 at 4:11 AM (10 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2004-04-18 01:32:53 PM
Privately held Google appears to have triggered a provision of the 1934 Securities and Exchange Act that requires it to disclose closely guarded financial details by the end of the month.

The filing, with the Securities and Exchange Commission, would reveal so much about the secretive firm that many experts believe Google might take the next logical step and file for an initial stock offering, reaping the financial rewards that go along with having to open its books.


Google is not being 'forced' to go public. Google is being forced to reveal financial information about the company which, if it's as good as the pundits expect, might make going public a good idea, and Google might do it.

That is all.
 
2004-04-18 02:24:47 PM
If they do, I know where my money is going to be for the month of May.
 
2004-04-18 04:59:05 PM
I don't know about anyone else, but I'm buying stock in it as soon as it becomes available.
 
2004-04-18 05:52:58 PM
When is fark's IPO?
 
2004-04-18 06:11:28 PM
It is still offensive.Damn government shouldn't have any business messing with the private business affairs of a business.
 
2004-04-19 04:18:44 AM
any b-school types care to explain the reason behind this law? is it some kind of anti-trust-ish type of thing? what difference does it make if their financial data is public or not if nobody can trade it anyway?
 
2004-04-19 04:20:14 AM
Lets say your company makes $100 million a year.

Then, tommorow, the stock market values it at $50 Billion -- a 500x multiple. This is absurd and way overvalued. But now you have alot of stockholders that possess overvalued stock.

And are desperate for you to make decisions that would cause you to be worth $50B -- or at least appear worth $50B, so that the shares can be sold to some other sucker at the 500x multiple.

So you make these decisions. And, in the long term, you stop making $100m/year, and instead go out of business.

Going public caused you to lose money. Oops. That's what Google's trying to avoid -- the ludicrous overexpansion of value that eventually kills the company (at the benefit of present shareholders, but not future ones).
 
2004-04-19 04:23:49 AM
let me just be the first to welcome our new google overlords!

/couldnt resist
 
2004-04-19 04:26:35 AM
2004-04-19 04:20:14 AM effugas

Lets say your company makes $100 million a year.

Then, tommorow, the stock market values it at $50 Billion -- a 500x multiple. This is absurd and way overvalued. But now you have alot of stockholders that possess overvalued stock.

And are desperate for you to make decisions that would cause you to be worth $50B -- or at least appear worth $50B, so that the shares can be sold to some other sucker at the 500x multiple.


Umm...or the stock price adjusts when it becomes apparent its overvalued. Yahoo's share price was overvalued during the dot com bubble. They didn't go out of business; the price of their stock adjusted and now they're doing just fine.
 
2004-04-19 04:28:40 AM
Google, those lying dirty sons-of-biatches!!!!!! May they rot in hell!!!!

/far too drunk to know or remember what an IPO or any of this crap is. But Google WILL pay!!! Oh yes, they will pay!!!!! WAHAHAHAHAHAHAHAHAHAHAHAH!!! IPO up, Google biatches!
 
2004-04-19 04:34:40 AM
How can the SEC force an IPO? Sorry the financial segments of the news sound like Charlie Brown's teacher to me.
Look on the bright side, they didn't cave during the net boom and ka-boom
 
2004-04-19 04:38:29 AM
sorry for being ignorant, but how does google make so much money?
 
2004-04-19 04:38:56 AM
How can the SEC force an IPO?

they can't, but they can force them to publicly report their financial info. apparently this puts them in a situation where going public might be a better option.

i still don't really understand what forcing them to report their earnings does though. the law is from a while back so i'd be curious to hear about the historical reasons for why it got setup that way.. very interesting.
 
2004-04-19 04:40:16 AM
I was watching CNN Headline News a couple of years ago, and for the SEC's icon they had the icon for the SouthEastern Conference! A damn college sports conference! I actually wrote into them about THAT one. Jeez.
 
2004-04-19 04:48:57 AM
This is old news (about six months old). In any case, this has happened before-this rule is why Microsoft went public in 1986. Whether or not Google will go public because of this is unclear; I don't think they should, since they don't need cash to expand, which is the usual reason for going public (they are, by all accounts, cash rich).
 
2004-04-19 05:15:12 AM
This corporate legal mumbo jumbo just has me completely baffled. They call Google a private company, and yet they have issued (RTFA) over 500 stock options. (... the company has granted stock options to most of its more than 1,000 employees.)

WTF? How can you issue shares of a private company?
 
2004-04-19 05:15:17 AM
The SEC isn't forcing them to go public, but if they have to reveal their financials, then why not.

Wade thru the U.S. Code here

Thanks to Google!
 
2004-04-19 05:18:42 AM
The rube who wrote this article fails to realize that a holder of stock options is not a "shareholder of record" - as the guy watching the door at any share holder's meeting will tell you.

You're not a shareholder until you hold at least one actual share. Options are just that - options to buy shares at a given price.
 
2004-04-19 05:25:27 AM
trapped-in-CH Oh yeah, if a business incorporates, no matter how big or small, certain requirements come into play: Shares of ownership issued, regular stockholder meetings, etc. An incorporated entity needn't be publicly traded, but because it is an entity separate from the owner(s), it must behave as a separate entity. That's why the owners are protected from liabilities created by the incorporated entity. Privately issued stock determines ownership portions of the entity.

OK, I'm way over my head here.

/Not a lawyer, but I can play one on FARK
 
2004-04-19 05:26:19 AM
trapped-in-CH
Private companies still have shareholders. Someone has to own the joint. Right? If I open a lemonade stand and own 100% of it, I am the lone shareholder. If I sell 25% of the business to a partner, then there are two shareholders.
 
2004-04-19 05:28:27 AM
effugas

The IPO itself allows a company to convert it's 'equity' into liquid funds. This is percieved as "making money"

What you *lose in an IPO is control of your company. Unless you're already entirely dependant on investors, in which case you've got very little to lose. Or at least the executives have little to lose by setting up a scenario where they take home a bunch of cash and then the company crashes and burns.
 
2004-04-19 05:29:21 AM
Just give the whole thing to me, then they don't have to show their books. I promise to take care of it.
 
2004-04-19 05:44:49 AM
Steelsniper

I too do not know how Google makes any money at all. What services do they offer other than being a free search engine?
 
2004-04-19 05:58:05 AM
It means INITIALL PUBLIC OFFERING.
Think of it as betting chips at Vegas. You walk into the Casino (Wall Street) and cash in your lifesavings (your stock) and get some chips for it initially (IPO). You use those chips to rob (invest) the money people paid to give your company that initial boost of capital.
 
2004-04-19 06:34:45 AM
For a company like Google, going public can be a very, very dangerous thing. Its strategy of pushing technology and "doing good" versus maximizing profit for next quarter's earnings report is what's enabled it to jump ahead of the competition. A shift to a public company will mean that its long-term goals will, in all likelyhood, be squashed to the God of Maximizing Shareholder Value, an attitude that has destroyed more than one technologically inovative company in the past (HP, anyone?)

Google's executive management -- and, I hope, its employees -- should know this already. All an IPO do would force a cash infusion into the company (which they don't need) and make the primary shareholders rich beyond their wildest dreams (they're already rich, but are they rich enough?), but at the cost of the company's soul.

It will be interesting to see the path Google will take.

Oh, and Google does a bit more than "just" a search engine. http://www.google.com/services/
 
2004-04-19 07:18:27 AM
AP P.E.
To find the answer to your question, I did this advanced research called "clicking on the link that says Business Solutions."

Google makes a ton of money.
 
2004-04-19 07:36:13 AM
2004-04-19 04:40:16 AM daveuf

I was watching CNN Headline News a couple of years ago, and for the SEC's icon they had the icon for the SouthEastern Conference! A damn college sports conference! I actually wrote into them about THAT one. Jeez.


Well, CNN is in Atlanta, where the NCAA football and basketball championships are usually held. Maybe they don't know the difference.
 
2004-04-19 07:44:13 AM
Private companies still have shareholders. Someone has to own the joint. Right? If I open a lemonade stand and own 100% of it, I am the lone shareholder.
No, you're the sole proprietor, until you're DrToast's Biatchin' Lemonade INC.
If I sell 25% of the business to a partner, then there are two shareholders.
No, this is a business partnership. Gotta have that Inc. thing.

/going thru the Inc. crapola as we speak...
 
2004-04-19 07:57:46 AM
Did I say NCAA? I meant SEC. Damn coffee.
 
2004-04-19 08:35:06 AM
thanks gentlemen. When I read "private", the first thing on my mind is never "Incorporated". But it is Google, Inc, as this bit of history shows:

Andy Bechtolsheim, one of the founders of Sun Microsystems, was used to taking the long view. One look at their demo and he knew Google had potential a lot of potential. But though his interest had been piqued, he was pressed for time. As Sergey tells it, "We met him very early one morning on the porch of a Stanford faculty member's home in Palo Alto. We gave him a quick demo. He had to run off somewhere, so he said, 'Instead of us discussing all the details, why don't I just write you a check?' It was made out to Google Inc. and was for $100,000."

The investment created a small dilemma. Since there was no legal entity known as "Google Inc.," there was no way to deposit the check. It sat in Larry's desk drawer for a couple of weeks while he and Sergey scrambled to set up a corporation and locate other funders among family, friends, and acquaintances. Ultimately they brought in a total initial investment of almost $1 million.


from http://www.google.com/corporate/history.html
 
2004-04-19 08:52:51 AM
Uhlek

Very insightful. Google would indeed have an insanely sucessful IPO.. but frankly, the amount of control the company would lose in the process makes it not worthwhile. Google's culture, and value of trust (in its quality search results) is what makes it so popular. If google goes public, it now has to answer to greedy shareholders that want return on their investment NO MATTER WHAT. Rather then building a better quality product, they would be forced to maximise profits.

Google, say hell no to IPO.
 
ZAZ [TotalFark]
2004-04-19 09:10:53 AM
Imagine if Microsoft ran a network service. That's what post-IPO Google would be like.
 
2004-04-19 09:15:57 AM
why does silicon.com get its own tag picture thing? ive never seen another link for it..
 
2004-04-19 09:44:11 AM

George Reyes joined Google as chief financial officer in 2002. Reyes is a seasoned finance executive with a wide range of experience at several well-known Silicon Valley technology companies. Reyes joined Google from ONI Systems where, as interim CFO, he assisted in the sale of the optical networking company to Ciena Corporation.

Is it just me, or does this man seem to exude pure evil?
 
2004-04-19 09:55:26 AM
For those people who are going to continue asking about the verb "force", here's another explanation. Google MUST reveal their financial statistics. Doing this would "give them all the disadvantages" of going public without ACTUALLY going public. Thus, to keep things in their favor, they are pretty much forced to go public.

The SEC is not forcing them to go public, but because Google understands the situation, they're forced to go public -- meaning, it's the best course of action.
 
2004-04-19 11:13:01 AM
The SEC financial reporting rule exists because the SEC becomes concerned when a large quantity of people are at risk in an illiquid investment without access to the numbers. Some public cos. don't have 500 shareholders. The concern becomes the greater if ---usually through employee option exercise-- some of those shareholders are not "accredited" investors (people considered to be 'over 21' and able to bear the risks. The rule per se, doesn't "force" an IPO but it makes it more likely since the reported data cost $$ to prepare; and, market makers may offer to trade the shares on the bulletin board; and, competitors can start slicing and dicing the data for their advantage.
 
2004-04-19 11:38:42 AM
People who know finance -

Could Google avoid this by spinning off several of its operations such that it no longer is required by the SEC to disclose financial information while keeping full ownership of the now separate corporate entities in the same group of people?
 
2004-04-19 11:53:42 AM
Alright ! Google goes public. That's the end of the google then :-)
 
2004-04-19 11:55:11 AM
raginghamster
Is it just me, or does this man seem to exude pure evil?

Actually, for some weird reason he strikes me as the kind of guy who plays bass guitar in his spare time, but only in the garage because his wife likes to decorate and doesn't like his amp cluttering up the house.
 
2004-04-19 11:58:05 AM
2004-04-19 07:44:13 AM Spazzmatazz
No, you're the sole proprietor, until you're DrToast's Biatchin' Lemonade INC.


Being the sole proprietor does not preclude me from being a shareholder. Shareholder is not the same thing as stockholder.

No, this is a business partnership. Gotta have that Inc. thing.

Again, it is a business partnership with two shareholders. Stockholders are shareholders, but shareholders aren't always stockholders.
 
2004-04-19 12:35:36 PM
when is Fark's IPO?

When you see one of these:
 
2004-04-19 01:29:36 PM
Quick1

Me too dude, me too. I freaked out when I heard about them possibly doing it, so I figure if I can get a thousand shares or so and hold onto it for a while - Google is very quickly eclipsing Yahoo as the best search engine and web portal - that's going to be a good.
 
2004-04-19 01:50:36 PM
Quick1 - "very quickly eclipsing yahoo" ?
Google has long since been the best search engine. If anything, the IPO will put it in the hands of shareholders and it will get worse - we'll be plagued with popups, banners, advertising etc etc. It'll go the way of altavista.com.....
 
2004-04-19 06:18:57 PM
The headline could've been funny.

SEC rule may force a Google IPO by April 30. OMG
 
2004-04-20 01:34:41 AM
trapped-in-CH - WTF? How can you issue shares of a private company?

It looks like Google is issuing an IOU to its employees, saying "when we go public, you'll get x number of shares."

However private companies can also issue shares. They just aren't publicly traded on the stock market.
 
2004-04-20 12:58:50 PM
Every company has shares. Regardless if it is held in private or public venues.

A family business, for example, can have shares with each family member owning parts (called shares) with the president having the controling interest (majority of shares).

Finally, if you RTFA, you'd know Google can never be required to go public.

Not to mention there is no way in hell to get everything needed done in time for a 4-30 offering.
 
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