The US Securities and Exchange Commission (SEC) yesterday approved Google could proceed with its initial public offering (IPO).
"Google has been granted its requested approval effective immediately," said SEC spokeswoman Amy Best.
Google can now close its share auction inviting bids from potential investors and allow its underwriters to begin accepting some of those bids to start public trading.
Google representatives could not immediately be reached for comment.
IPO price cut
Earlier on Wednesday, Google posted a notice on its IPO Web site saying that the offering price for shares will be in the range of $85 to $95, down from the estimate of $108 to $135 originally cited in its IPO prospectus.
Google, which will trade shares on the Nasdaq stock exchange under the ticker symbol "GOOG," said it is hoping to raise about $1.3 billion from the sale of about 14.1 million shares.
Along with lowering its opening share price, Google has hit a number of hurdles in its highly anticipated, yet rather unorthodox IPO bid.
The company drew the attention of SEC and California authorities when it revealed that certain US securities laws may have been violated when Google issued unregistered shares to employees and consultants in the past. Though Google has offered to solve the problem by buying back the shares in question, at a potential cost of about $25.9 million, on August 5 the company announced that informal inquires had been launched to look into the matter. This inquiry is ongoing.
Another controversy centres on an interview Google's founders granted to Playboy magazine in April, before the company filed its IPO registration papers with the SEC. The interview appeared in Playboy's September issue, which came out this month, raising concerns that it might put the company in violation of the Securities Act of 1933, which bars company executives from discussing their company's prospects as an IPO nears. Google has said it doesn't think it has violated the law with the Playboy interview.
Opinions vary on how much Google's image has been damaged by its missteps in the IPO process.
General consumer users shouldn't be too concerned about Google's IPO bloopers, because in the worst case, they can switch over to a competitor for Internet services such as search, said Rob Enderle, principal analyst in Enderle Group. However, the IPO gaffes should be a source of worry for Google's enterprise customers, such as those who have purchased the company's Search Appliance, he said. The Search Appliance is a device that combines hardware and software to provide companies with a search capability similar to the one employed at the Google search engine, at a price that starts at $32,000, rising to hundreds of thousands of dollars.
"The IPO has been horribly handled and it does reflect on the way Google is being run. A corporate customer buys something and expects to get support and a certain amount of service for its purchase, and if the vendor can't execute, it raises the level of risk the corporate customer has to take into account for the purchase," Enderle said. "The mistakes that have been made are pretty much unprecedented in a company like Google. From that standpoint, this should be something the corporate buyer should watch."
Others think the fallout from the IPO bungles isn't as serious. "The company has got a lot of publicity for what is an unorthodox way of raising money in the capital markets, and that plays well to its brand image as a pioneer," said David Schatsky, a Jupiter Research analyst. "There's been a lot written about (the IPO) glitches, but at the end of the day (the IPO) is only going to be good for consumers and other Google customers."
"If being interviewed in Playboy is a mistake, it's about the most benign mistake that a corporate executive has made in the last three years," Schatsky added.
Of course, the ultimate purpose of taking the company public is to raise money, and Google has been tight-lipped about how it will use the money it raises from the IPO. It has only said it will use the money for general corporate purposes, such as sales and marketing expenses, research and development expenses and general and administrative expenses; capital expenditures; and possible acquisitions of businesses, technologies or other assets.
"The company has been extremely quiet about its strategic plans and how it intends to use the money that it's raising, so it's reasonable to expect there will be no immediate visible impact for either enterprise customers or consumers following this IPO," Schatsky said.
Google should focus on exploiting the value of its assets, such as its technology platform, its infrastructure, its brand name, its intellectual property and the vast amount of traffic it generates as the most widely used search engine in the world, Schatsky said. "I think they would be wise to be selective about what they do. The world doesn't need another portal, unless Google can provide the functionality in a way that benefits dramatically from its unique search capabilities," he said. "The company is built on the strength of a small number of really good ideas."
How Google chooses to invest its IPO money will determine whether it succeeds like competitor Yahoo or collapses like Internet supernova Netscape, Enderle said. "If we were talking about a mature company, you would expect them to be putting a lot of effort into research and development, to build out a product suite. An immature company might go on an acquisition spree. That's what Netscape did," Enderle said.
Based on the way Google has handled the IPO process, Enderle is skeptical over the company's future. "Since they're behaving more like Netscape, I'm concerned they'll spend a lot of the money on perks and buying companies as opposed to spending the money on much more sure investments," Enderle said. "The IPO process gave us a view of Google that was anything but mature."