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Google to Take IPO Bids Today

August 13, 2004|From Bloomberg News

Google Inc. will begin taking bids for its auction-style initial public offering today in advance of setting a share price next week.

Individuals and institutions who registered by 2 p.m. PDT on Thursday would be able to bid for Google stock, the Mountain View, Calif., search engine company said on its website.

Google will be able to test whether investors are willing to pay the $108 to $135 it believes its shares are worth. Analysts concerned about the company's slowing sales growth and competition from Yahoo Inc. and Microsoft Corp. have said the IPO may not raise as much as the $3.47 billion that Google has projected.

"There's no question that there are a lot of risks related to this offering," said Standard & Poor's analyst Scott Kessler, who recommends that investors bid $110 for Google shares.

After bidding is closed, Google will set the price for its IPO in consultation with lead managers Morgan Stanley and Credit Suisse First Boston. Google has said in filings with the Securities and Exchange Commission that the auction system is intended to limit the share-price volatility other companies have experienced in their IPOs.

"Google is trying to get every last penny from investors," said Rick Jandrain, manager of the $2.5-billion One Group Mid Cap Growth Fund in Columbus, Ohio, which hasn't registered to buy shares in the IPO. "They're setting themselves up not to have a successful launch. I think a lot of people are on the sidelines."

The stock may fall after the IPO because of the "winner's curse," common to auction-style IPOs, Google said in filings. That's where investors believe there is little demand for stock above the clearing price and refuse to bid higher.

Google is selling into a declining market for Internet stocks. Web shares have fallen through July and August as Yahoo, Amazon.com Inc. and IAC/InterActiveCorp reported second-quarter sales that were lower than analysts estimated.

The company generates 98% of its revenue by selling text advertisements that appear next to search results and other online content. The ads appear on Google's own sites as well as those of companies it's formed partnerships with, including Time Warner Inc.'s America Online.

Google said it expected its sales growth to slow and profit margins to decline in the future, partly because of competition.

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