Google co-founders Sergey Brin, left, and Larry Page are seen at company headquarters Thursday, Jan. 15, 2004, in Mountain View, Calif.(Agencies)

Google Inc spooked investors on Thursday after disclosing it may have illegally issued shares worth as much as $3.1 billion to current and former employees, a week ahead of its hotly anticipated initial public offering.

The admission was made in a filing with the US Securities and Exchange Commission on Wednesday.

A source familiar with the offering said last Thursday afternoon that the IPO, which was expected to happen as soon as next Tuesday or Wednesday, was being delayed by about a week because it is taking institutional investors longer to register to bid on the shares. The delay is not due to the disclosure, said the source, who asked not to be identified.

Google spokesman David Krane, who described the company's disclosure and the offer to buy back the shares as a normal part of the IPO process, declined to comment on the timing of an IPO.

Lead underwriters Credit Suisse First Boston and Morgan Stanley also declined to comment on the company's disclosure or the timing of the IPO.

Google plans to raise as much as $3.3 billion in its public offering.

But investors said the disclosure cast a pall on the IPO in an already gloomy market in which Internet stocks have declined.

"It's hard to understand how that could be overlooked," said Mark Herskovitz, manager of the Dreyfus Premier Technology Growth Fund. "The deal was already controversial, and I'm sure it'll go through OK, but this does not add to people's comfort levels."

Google said in the filing that 23.2 million shares it issued to 1,105 current and former employees and consultants between September 2001 and June 2004 were not registered as required by law. It also granted an additional 5.6 million stock options to 301 people.

In the filing, Google offered to buy back the shares and options for $25.9 million, including interest at any price between 30 cents to $80. Google is expecting that its shares will be valued at $108 to $135 at the IPO.

The so-called rescission offer is only good until the actual IPO when the shares in question would be automatically registered with the SEC.

Holders of the securities could sell them or wait until they are automatically registered, or sue the company rather than accept the buyback, Google said.

"The rescission offer is not an unanticipated development," said Krane, adding that the offer was first disclosed in an April registration statement.

Google said it did not expect anyone to accept its offer given the value of the shares would likely be well below the company's expected share valuation of $108 to $135 at the IPO.

"As we have previously disclosed we do not believe that the rescission offer will be accepted by our current and former employees and consultants in an amount that would represent a material expenditure by us, given that the weighted average purchase price of the stock and exercise price of the option is only $2.86," Krane said.

One investor, who asked not to be named but who attended the roadshow, expressed little cause for concern.

The investor pointed to Salesforce.com, which managed to complete a highly successful IPO in June. That debut was delayed after its chief executive gave an interview to the New York Times that may have violated securities rules meant to prevent companies from hyping their stocks before an IPO.

"If Salesforce.com...went public with the legacy of issues that they've had, then I doubt if this little thing is going to get in the way of Google," said the investor, who was not planning on buying Google shares.

Yet other investors raised questions as to why Google had not disclosed the rescission offer earlier.

Another investor, who also declined to be identified, said the latest disclosure could spook investors who are afraid of last-minute disclosures that could affect the outcome of the IPO.

The rescission offer will expire in September, Google said, without specifying an exact date. Holders who reject or do not respond to the offer will have their shares automatically registered after the IPO is completed, it said.

Google said it may have broken federal securities laws and the securities laws of 18 states and the District of Columbia by failing to register the stock and options or exempt them from registration.

Google said the states whose securities laws may have been violated are Arkansas, California, Colorado, Connecticut, Georgia, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Texas, Virginia and Washington.

The company's home state of California said that it would investigate the latest disclosure from the company.

Google is using a "Dutch auction" process for the IPO, and bidders may register at http:/www.ipo.google.com.

Google and its underwriters will determine the highest price at which there is demand for all shares, and price the shares at or below that price.

(Agencies)

spook : to frighten, especially to startle and cause nervous activity in（驚嚇）

disclose: to make known (something heretofore kept secret)（揭露）

admission: a fact or statement granted or admitted（供認）

IPO: initial public offering（首次公開上市，發行股票）

underwriter: one that guarantees the purchase of a full issue of stocks or bonds（證券包銷商保證購買全部發行的股票或公債的人）

pall: to become insipid, boring, or wearisome（遮蓋物）

controversial: of, producing, or marked by controversy（爭論的, 爭議的）

buy back:（回購）

stock options: （職工優先認股權, 在指定時期內定價定額購股權）

roadshow: （股票上市前的公司路演）

hype: exaggerated or extravagant claims made especially in advertising or promotional material（大肆宣傳, 大做廣告）

exempt: to free from an obligation, a duty, or a liability to which others are subject（免除）