Financing and Initial Public Offering of Google Inc.

Initial Funding :-

The co-founder Sun Microsystem Andy Bechtolsheim was the first venture capitalist to invest in Google with a contribution of USD 100,000 in August 1998. On 7th June 1999 it was announced that the company had got equity of USD 25 million and a majority of it came from rival venture capitalists Kleiner Perkin Caufield & Byers and Sequoia Capital.

The phenomenal growth of Google meant that more funds were required for expansion but founders Page and Brin were reluctant to take the company public as they were in mood to relinquish their hold over Google. Sequoia Capital forced the founders to appoint a CEO by threatening to withdraw their loan of USD 12.5 million. Bowing to the threat Eric Schmidt was appointed the 1st CEO of Google Inc. in March 2001.

Initial Public Offering (IPO) :-

Despite their reluctance the founders had no option but to go public. As the discussions of initial public offer (IPO) began the company was approached by Microsoft Inc. either for a possible partnership or merger but the deal could not be made. Morgan Stanley and Goldman Sachs Group were hired in January 2004 to arrange for an IPO which was to raise about USD 4 billion

On 29th April 2004 Google Inc. filed the required form in which they intended to raise as much as $ 2,718,281,828. Both the date and time had mathematical humor behind it and was consonant with Google’s corporate culture. 2,718,281,828 is equal to mathematical constant while 29th April 2004 was the 120th day of 2004. Under Section 12 (G) of the Securities Exchange Act 1934 it is compulsory for companies whose assets have reached USD 10 million and/or the number of shareholders (including those who have stock options) has crossed 500 to file financial and other information with SEC within 120 days of the year in which it was reached. Google stated that each of their 3021 employees were stakeholders in the company. In its filing Google punned that due to their tremendous growth they would lose some of the advantages of private ownership as they would have file their report to SEC whether they wanted to bring the IPO or not. The deadline had just accelerated the process. The filing also revealed that Google had been in black since 2001 and its profits and revenue in 2003 were USD 105.6 million and USD 961.8 million.

Morgan Stanley and Credit Suisse First Boston were the joint underwriters of the IPO and they chose the Dutch Auction to raise the funds so that everyone could participate in the auction. Though the company was forced to cut the price and the size of the offer it went off smoothly. The company offered 19,605,052 shares @ USD 85 each out of which 14,142,135 were offered by Google (√2 = 1.4142135) while 5,462,917 shares were offered by stakeholders. It raised USD 1.67 billion and the market capitalization of Google crossed USD 23 billion.

Google is listed on NASDAQ and its ticker symbol is GOOG

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