A Report on New Issues Market – With Special Reference to IPOs Case of

Table of Contents

Introduction 3
Problem 3
Google Case: Overview 4 The Company 5 Competition 6 The IPO 6 The Process 7 The Book Building process 7 Dutch auction method 8
Alternative valuation technique: Book building 10
Appendix – 1 (A): Financial Statements of Google 13

Introduction

The process of going public provides a company with much needed growth capital. Although there is incredible wealth transferred in initial public offerings, some companies feel cheated in the bargain. Since 1980, the first day price increase after an initial offer has averaged 18.8%. (Ritter 2002)[1]. The increase in price …show more content…

But they did so in order to maximize their disclosure of information as mandated by the SEC (Securities and Exchange Commission). The threshold of SEC rules requiring quarterly disclosures is 500 stock or stock-option holders and $10 million in assets. As Google approached this threshold, the management team decided to fully utilize their disclosure to increase capital. The public offering, however, would not be only a matter of convenience. Aside from creating a public market for its shares and facilitating future access to market, the public offering also goes to finance Google’s expansion.
On August 19, 2004, Google went public issuing 19,605,052 shares. This was comprised of 14.1 million Class A shares for which Google received the proceeds of sale and 5.5 million Class A shares for which selling stockholders received the proceeds, yielding a total of approximately $1.7 billion dollars. By creating an additional class of voting shares (class B) retained by the company, Google retained nearly all control (99.2%) of the company post-IPO.
The market for initial public offerings at this time was in an upward trend of a cycle that bottomed out in mid-2003 following the