Google up in market debut after bumpy IPO
(Agencies)
Updated: 2004-08-20 08:36

Google Inc. shares made their long-awaited stock market debut on Thursday, rising sharply to $100 after an initial public offering marked by missteps and lackluster market conditions.

Google co-founder Larry Page and Chief Executive Eric Schmidt, guarded tightly by security, were at the Nasdaq stock market's broadcasting facility in Manhattan as the Web's most popular search engine began trading as a public company.

After ending its unconventional auction to price and sell the shares on Wednesday, Google sold 19.6 million shares at $85 each, raising $1.67 billion, the biggest IPO so far by an Internet company.

A ceremony with Google and Nasdaq executives is shown on a large screen at the Nasdaq MarketSite in New York, August 19, 2004. Shares of Google Inc. will make their Nasdaq stock market debut after the year's most anticipated initial public offering priced far below initial estimates, raising $1.67 billion.  [Reuters]

The shares ended trade at $100.34, up $15.34, or 18 percent. Trade ranged from a high of $104.06 to a low of $95.96.

Google shares dipped slightly in after-hours trade after Nasdaq closed, to $100.02, but analysts expected the shares to be well supported in the weeks ahead as buyers who missed out on the auction place bids.

"There were a fair amount of institutional buyers that stayed out the auction but came in (today)," said Martin Pyykkonen, an analyst at Janco Partners. "I see a floor in the $90s."

Workers at Googleplex, the glassy corporate complex in Silicon Valley, waved off reporters' questions about their big payday as they showed up for work on a cool Thursday morning. Local businesses reported that some of Google's 2,300 employees had been shopping recently for new cars and toys.

Google, however, did not fetch the price it had initially targeted for its IPO. On Wednesday, Google slashed the expected price range on the shares to between $85 and $95, down from a previous range of $108 to $135. It also cut the number of shares offered to 19.6 million from 25.7 million.

One fund manager said the lowered price might invigorate investor interest. He said he might buy Google shares in the next few days, depending on how they performed.

"At $108 to $135 a share, it was too expensive," said Douglas Wright, a portfolio manager for Britannic Asset Management in Edinburgh, Scotland. "But now we have a much more comfortable valuation."

ISSUES REMAIN

Trading in Google's shares had a rocky start in the first few minutes before the shares officially opened when they appeared to debut at $136. A Nasdaq official said this was the result of two trades that "should not have gone through."

Nasdaq declined to comment further.

It was the latest hiccup for the unusual auction-based IPO.

The U.S. Securities and Exchange Commission is requesting additional information on a recent Playboy magazine interview with the company's founders, but the company said it does not believe the pre-IPO interview violated U.S. securities rules.

Google has said the SEC staff intends to recommend the agency pursue civil penalties against the company's general counsel. The SEC has also started an informal inquiry into Google's offer to buy back 23.2 million shares it may have issued illegally.

Google's IPO also came as it confronted a jittery investor public -- about two-thirds of this month's IPOs have priced below their estimated ranges, according to Thomson Financial. But market conditions aside, many investors said Google's initial price range was too optimistic. Some fund managers thought even the lowered price range was on the rich side.

Google also appeared to have angered Wall Street with its decision to hold an auction, observers said. The 28 underwriters received a fee of 2.8 percent on the deal, less than half the usual fees for typical IPOs. Merrill Lynch & Co. dropped out of the offering because of the auction process and slim fees. Lead underwriters were Morgan Stanley and Credit Suisse First Boston.

Google's competitors welcomed the IPO, saying that the search industry was poised for more growth.

Yahoo Inc., considered Google's closest rival, said it would continue to attract visitors to its site and Microsoft Corp., whose MSN Internet division is aiming to unseat Google, said there remained room for improvement in search technology.

Yahoo, seen as the closest comparable stock to Google, closed down 1.3 percent at $28.11 on the Nasdaq.

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