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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 may be offtopic, by why is this in the YRO category? I don't see how this has to do with digital, or analog, personal rights.
--trb
Maybe I am missing something, but why would anyone be willing to sell their shares back at a fraction of what they would fetch on the open market?
Riiiight.
Lets think about this. Google gave me shares and I am going to sell them _before_ the IPO. Not likely.
This is the situation that may cause them some problems.
"Oh, you hate your job? There's a support group for that, it's called everyone, they meet at the bar."
What's going to end up hurting the employees profits are the overhyped stock prices. As the article mentions it is likely that the prices will fall soon after the stock hits the open market.
Google mentioned this snafu in their original April 29 SEC filing, and said that they would offer further details on the rescission before the IPO.
Now they have, and the media plays it like it's some sort of scoop.
The real story here is not that Google screwed up (that happens regularly), but that the Google teflon is wearing thin in the media.
You can only play reporters as puppets for a few years, and then they get tired of your spin and start biting back. There will be a lot more negative press in the coming months.
It's not the amount of money that's an issue - it's the credibility factor, especially considering their IPO share pricing. Throw in the non-traditional auction format that they're using, and now the fact that they're essentially admitting that they weren't managing their shares properly... one's left with the question: "Is it worth $108+ a share? And can they be trusted?"
I'm a big fan of Google's, but I can think of a better ways to instill investor confidence than this approach.
Those shares are all fully-tradeable after September, so I truly beleive only a fool would sell back. I can see some lawsuits flying on this one.
If you buy the google IPO, you are freaking crazy. IPO's do one thing: allow the business investors to cash out of the company. Buy 5 years from now when we know the real value of the company, and how it faced its competitors (MS most notably).
Religion is a gateway psychosis. -- Dave Foley
Seems likely to me that a fairly substantial number of these "illegal" shareholders will not take the deal offered by Google, and elect to sue instead. The potential money damages Google will have to pay, as well as any potential SEC action, has the potential to significantly impact Google's market valuation.
Since, in theory, the IPO price was set at auction by people who looked at, among other things, the number of outstanding shares and the overall valuation of the company, this would seem to indicate that the price decided upon is invalid, as the data it's based on is invalid.
If the stock was overvalued before, it's much more overvalued now that it's revealed that Google has significantly more potential liabilities outstanding than were previously reported. This is a big black eye for Google in the markets, and it's highly likely anyone buying Google at the IPO price will lose their shirt on the deal.
Actually, this is huge news. What the company is saying is they have been issuing stock to their employees for years, arranged a filing with the SEC that did not account for these shares, and now are trying to buy them back for pennies on the dollar compared to their IPO price.
The thing is, deals like this are a slippery slope. Google needs to deal with the issue in order to go public, and cannot afford to pay out $3B to their current set of investors. If they manage to buy back the large majority of the stock, they will need to provide some incentive to get people to give away what is essentially a lot of money. Strange organizational changes, insane company expenses, ruffled feathers and internal battles could be the outcome of all this.
All of the items mentioned above would be distractions from the core mission, and are not the sorts of things anyone wants to see from a company preparing to go public.
M
Because the company cannot go public without resolving this issue. Google's challenge is to provide incentives for these people to forego their payback, but what are will Google give in exchange? I'm thinking there are going to be a lot of engineers with their own cessnas...
M
If low ids mattered for shit, I'd be modded up much higher on most of my comments ;-). We had the same percentages of chuckle-heads back in the good old days too, just say 'no' to /. elitism.
(posting with 'No Karma Bonus' either, I am so humble it hurts)
It's a strange world -- let's keep it that way
If I hold 5 percent of Google like one investor does there is no way in hell I would accept a buy back at face value. The investor probably got 5 percent for pennies (relatively speaking of course) and now they want to buy them back for pennies? If I was that investor I'd scream a big "Fuck That."
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One is born into aristocracy, but mediocrity can only be achieved through hard work.
I've always loved google, but this sort of bugs me.
I think I can predict the flames -- the market decides what the value is, I don't know that the stock will go down any better than the investors know the stock will go up, the google people deserve to get rich, and all of that.
But I remember the dot com days (as do most people here, I'm sure). I think that we're going to see a massive transfer of wealth between unsophisticated small investors who are doing more speculating than investing, and the sharpies running this IPO.
It seems to me that the geek community has never come to terms with exactly what happened in the dot com days, and how dishonest and damaging a lot of the financial shenanigans were. A lot of guys who were ring leaders -- guys like Jeff "profits don't matter" Bezos -- are still respected and admired.
You can say a lot of bad things about MS, and I'd probably agree with most of them. But they never screwed their investors the way that almost every open source IPO did. That's always something that's left out when people talk about the software morality play here.
I don't see why people see this as a good thing for the tech industry. The only way IPOs will be good, over the long run, is if the investors make good returns. With this valuation that's impossible. People are going to get screwed, just like the old days, and it will just revive the bitter taste in everyone's mouth, and make the next IPO that much harder.
Thanks for the useless insight of yours.
25m shares sold on open market at say 100 bucks per share is $2.5b.
In other words to buy this stuff back Goog will have to write a biiiig check in order to get those shares to the people they were promised to.
Then if they manage to pull that off, the existing (other) shareholders can class-sue someone in the management for gross negligence.
The problem is all the people that received the shares are only going to be paid a small amount of what they might be worth after the IPO.
For example, Joe Worker is thinking about moving to another job 2 years ago because he can get a higher salary. Google offers him 1000 shares. Joe sees alot of cash at the end of that rainbow, so sticks with working at Google.
Jump to today, Google says "we made a mistake, we'll buy your shares back for $25 (my guess)"
Two days later Google IPOs and hits $250, Joe is out $225K
So now Joe has cause for lawsuit, he deferred other employment based upon the 1000 shares he got 2 years ago, which ends up was illegal for Google to give him. So he is suing for at least $225K and any other pain and suffering.
So that $25 million buy back ends up being about $250million+ in lawsuits
I am now starting to think its not about how big a company is, or how a company got to where they are, or even if they do the right thing or not. People are just jealous that they are not part of it.
Its always been popular to bash Microsoft and its easy to see why from a geek, easiest term to use, point of view. Their business tactics and overall strategy. Then comes along Google which is also a technology company but the complete opposite, IMO, of how Microsoft operates but people are already starting to throw tacks and spikes in their road to success.
Its easy to say we are bashing them because we dont like their tactics, but it seems more what people are saying is that I am not part of it, I wont benefit from it, so hey it easier to get on some bandwagon and say they are doing things wrong and try to stifle their next step to success.
People always tell you this growing up but its interesting to see on a corporate societal scale, and instead of "its not fair...", now its "hmm...it seems you may not have followed guidelines according to blah blah blah blah..."
In addition to low fees, they aren't trying at the road show, made them all improve their computer systems, take 5 share orders and took away the really valuable part the right to issue shares at a very low price to favored clients (who pay out the nose for handholding of some sort).
Degaussing scares the bad magnetism out of the monitor and fills it with good karma.