Google Tries To Silence IPO Rumours

egoff writes "Google has put off an IPO for now, saying "Thus far, laziness has always won out. There are so many better things to do." The New York Post suggests that Google's focus on R&D doesn't really mesh with the financial accountability of a publicly traded company. However, many analysts believe a successfully Google IPO could rejuvenate Internet-company investments."

Comments

IPO's aren't a requirement

[swngnmonk]

IPO's are simply a way for the company to raise money, in exchange for (partial) public ownership of the company. The fact that insiders usually get rich in the process is incidental, but Silicon Valley has now been operating for years on the idea that this is how you get paid when you're a rank-n-file employee at a startup.

Microsoft's IPO in 1986 is an interesting case - they were dragged to the IPO kicking & screaming. Think about it - Apple started in 1976 and IPO'ed in 1981 (at the time, one of the most successful IPOs in history). Microsoft started in 1975, and still hadn't IPO'ed by 1986. So what made them do it? Their employees had been using their vested options in lieu of cash when buying houses, cars, etc. For a privately held company, that's completely illegal, and as a result, the SEC forced them to go public. Even at that point, Microsoft didn't need to raise capital publically, BillG and company wanted to retain complete control of the company.

Re:IPO's aren't a requirement

[JoeBuck]

Actually, there are two "exit strategies" that venture capitalists think about when they fund a company; an IPO is one, an acquisition by a large public company is another. In the case of Silicon Valley, the latter possibility is actually more common.

They are already enslaved to Venture funds

[Ars-Fartsica]

It is too late for Google to be "free" - they are already beholden to the masters of greed - the Bay Area venture capital industry. Rest assured that Kleiner and Sequoia will put this baby on the market when its ripe. This is what they do. They do not feed the poor or care about your search results. They care about making a lot of cash. They need a Google IPO to rebuild the gutted venture market. They are not waiting out of goodwill - they are waiting until the pig is ready to be slaughtered.

Re:So...

[Orne]

Q: Do companies ever go "we dont care what the investors want. We will do what pleases us, not them."

All the time.

"Going Public" basically means that you, the owner, are offering a percentage ownership to the public in exchange for the public's money. On the plus side, you get a fresh infusion of money to do research, increase inventories, hire more employees, etc. On the flip side, you are now responsible to the investors to keep the company profitable, and every now and then kick back a slice of your earnings to your investors as dividends.

Shareholder rights are managed like a pure democracy -- majority rules. This is why you usually see that "Pres So-and-so" owns 51% of the stock in the company... so their vote can always override whatever the public decides, providing that they disagree with the public. This is where stock options have an effect; directors giving themselves gobs of company stock in place of salary.

Now, it's not a good idea to piss off your investors, because they'll just turn and sell your stock, and you have to pay that capital back. That's why there are quarterly reports (you know, those big books you throw away every 3 months) that tell the public the state of the company, and whether your staff is doing a good job making money (price to earnings ratio). And, like most of the IPOs of the late 90s, your up the creek if that investment capital is your operations budget, and people want their money back, because then *poof* you're bankrupt.

VC Push Companies to Go Public

[Qwest94]

Whether Google goes public or not is less a question of whether it makes sense for them to stay private--clearly staying private has many many benefits strategically (treat employees better, don't have to disclose financials, not beholden to quarterly results), and such a private company could produce enough cash for the founders to live very comfortable lives. The real driver of a push to go public will be the venture capitalists that invested in Google. They have to get their investments liquid so that they can return money to their limited partners. These VCs likely have the voting power and/or legal clauses in their investment documents to force Google to go public, whether the management wants to or not.