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Google IPO Problems Surface
manavendra writes "The BBC is reporting that Google has admitted it may have breached stock market laws in the US, while CNET says Google may have run afoul of securities laws when it doled out millions of shares to employees and consultants over the past three years, according to a document filed Wednesday with the Securities and Exchange Commission."
This isn't huge news or anything. They found the mistake, theya re going to buy back the shares, it's going to cost about 25 million to buy the shares back.
25 million out of their on-hand cash reserves isn't that much.
I believe the link should've been this.
Technically it would be between $400 and $650 as you are required to buy at least 5. According the article speculators believe that it is overpriced and will quickly fall after the market opens.
No that anyone RTFA, much less supplemental information, but for historical purposes here's a link to the specific document in the Google SEC filing that talks about the "recission offer":
Form S-1 Registration Statement
This section in particular is a good summary of what they did.
Google is going to be spending a lot of money on lawyers, it would seem. This isn't the only problem they're facing.
This sig seemed like a good idea at the time....
No, it's quite true. They *have* managed their company differently! Whereas most companies report their options issued and shares sold, Google's management didn't. How radical and different-thinking of them! How daring they are, to break the law!
Which stock is more likely to grow 10%? The one that would have to increase by $13 a share, or the one that would only have to increase by $1.30?
And you missed it by 1000 because 0 - 999 are NOT 4 digit UIDs.
To put it simply: When a company has a unregistered private share offering to non-qualified investors (essentially non-high net worth, or "unsophisticated investors") they are required to get a waiver from the "unsophisticated investor" that they are willing to participate in the risk of investing in an unregistered offering.
The risk is that there are not the same corporate disclosure requirements for unregistered offerings as there are for registered offerings.
In the event that the company wants to go public at a later date, they usually provide rescission offers to these investors, which allow them to cash before the risky public offering.
Most rescission offers are optional, and in the event that the investor declines they will sign an additional waiver that says they are going along for the ride.
Yeah. I never get modded up. Just because I was here before there was even a registration system shouldn't count for anything. Its like those people who used to think they were cool because they had really low ICQ numbers.
Now, if only the comments system was easier to read and have discussions on, I'd probably post more, but then, no one cares what I say anyway.
I guess this article just shows that no one reads these SEC filings -- the rescission offer was disclosed in the very first S-1 filed at the end of April. (direct link to the original rescission offer disclosure) And it's not like it was buried. It has its own entry in the table of contents.
I think that most financial people who are thinking of buying shares have probably seen this, if they've been following the filings. Remember that there have already been 3 amendments to the registration statement, plus the S-1 to the rescission offer, totaling 5 different documents that disclose it. Also, the financial statements disclose it, so add the Form 10 that Google has filed and the 3 amendments to it, for a grand total of 9 different filings over the past 3 months that all mention it.
These people probably don't think it's a big deal, because of the relatively small liability (see Section 12 of the Securities Act of 1933), and probably no one will exercise the rescission right anyway (they'd be crazy to do that before the IPO). More importantly, this kind of stuff happens more often than you might think; some companies will just take the risk of this liability and not do a rescission.
Also, don't confuse section 12 liability (which is essentially about selling shares in unregistered/non-exempt transactions) with rule 10b-5 liability, which is what you hear about all the time (all those class actions are usually rule 10b-5 actions). 10b-5 is about fraud.
"Maybe I'm missing something, but ... Since they are only selling 9% of their total stock, in effect, they still have majority controlling interest in their own company and can, in effect, tell Wall Street to go stick it."
Well, no. If you're a public company, mgmt is obliged to act in accordance with the interests of the entire investor base, including minority investors. So, for example, a company couldn't decide to sell key assets to the Chairman for $1, even if he owned 70% of the stock, since such an action would be detrimental to the interests of the other 30% of the shareholders.
In a filing to the US market watchdog, Google said it had neglected to register almost 30 million shares and options issued to staff.
It is now offering to buy them back - albeit at prices way below the $108-$135 at which its flotation is set.
Based on the information from Yahoo! News, I calculated that given a total value of $36 billion, and a share price of $108-$135, there must be between 266 million and 333 million shares.
Given that Google can raise a maximum of $3.3 Billion, it must be offering at least 24 million shares.
If it is offering 24 million shares out of a total of 266 million, then it is only offering 9.1 % of the company to the public.
So, google has neglected to properly account for slightly more shares than they plan to offer to the public. And they are offering at a very high starting price.
Actually I tried to change it after the fact, for your information. Rob dissed me.