Google's $2.7bn flotation plans bar British investors from auction

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The Independent Online

Uk investors are in effect being barred from taking part in the $2.7bn (£1.5bn) initial public offering from Google. The company said yesterday that its flotation would be limited to American investors only.

Uk investors are in effect being barred from taking part in the $2.7bn (£1.5bn) initial public offering from Google. The company said yesterday that its flotation would be limited to American investors only.

Although the unconventional company's stated aims include an attempt to "make the world a better place", this mantra will apply only to US investors when it comes to the IPO.

Google's Form S-1, filed with the Securities and Exchange Commission on Thursday, said: "We have not undertaken any efforts to qualify this offering for offers to individual investors in any jurisdiction outside the US. Therefore, individual investors located outside the US should not expect to be eligible to participate in this offering."

The filing with the SEC reveals a raft of information on the company. As well as details of the auction, it also declares how much Google's executives are paid. Google's highest paid executive is not Sergey Brin nor Larry Page, who founded the company and were both paid $356,556 last year, but Omid Kordestani, Google's senior vice president of worldwide sales and field operations. He was paid $569,456 in 2003, including commission of $347,900.

Eric Schmidt, Google's chief executive, was paid a total of $551,556 including a bonus of $301,000. However, Mr Schmidt also owns nearly 15 million shares in the company, while both Mr Brin and Mr Page own more than 38 million shares in Google. Only the richest UK investors who already have a well-established broking relationship with a big US bank stand any chance of winning an allocation in the IPO.

The IPO, which involves a highly unusual online auction as a means of allocating share, will be closed to Google's legions of international users.

However, Wall Street bankers yesterday said that Google's Form S-1 was only a preliminary step. The company could yet decide to mount an international offer for its shares given the global interest in the IPO, they said. Google's auction process is being controlled by two main underwiters, Morgan Stanley and Credit Suisse First Boston, who are expected to share between $82m-$109m in fees.

The first step is for investors to qualify by obtaining a unique bidder ID number after meeting the underwriters' account eligibility and suitability requirements. Having qualified, an investor will then be asked to submit bids, including the number of shares they want and price per share they are willing to pay. Although bids can be submitted by telephone and fax, as well as online, investors have to agree to receive Google's prospectus electronically otherwise be excluded from the IPO.

A master order book will be collated. Google and its banks will reject any "speculative" and "manipulative" bids. To discourage people stagging the issue, Google said it will move its IPO price range and the amount of stock on offer during the auction process to meet demand. "In an auction process this could result in downward pressure on the price," said Google.

The eventual IPO price will be based partly on the highest price at which all the shares in the auction can be sold. The eventual allocation will then be made on a pro-rata or maximum share allocation basis.

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