Posted on 08/04/2004 9:08:04 PM PDT by HAL9000
SAN FRANCISCO (AP) -- Google Inc. apparently doesn't handle bureaucratic paperwork as smoothly as its online search engine sorts through billions of Web pages.For nearly three years, Google neglected to register more than 23 million shares of its stock with securities regulators, an oversight that injects an unexpected legal risk into the Mountain View-based company's highly anticipated IPO.
The bungling, disclosed in Securities and Exchange documents filed Wednesday, means the shares may have been illegally issued, exposing the company to possible lawsuits.
In an attempt to set things right with hundreds of affected employees and consultants, Google is offering to buy back 23.2 million shares and 5.6 million outstanding stock options for $25.9 million, including interest payments.
With $549 million in cash as of June 30, Google can easily afford to make amends.
But it's uncertain whether the gesture will satisfy everyone affected by the possible violations that occurred from September 2001 through June 2004.
Google warned that its buyback, or "recission," offer may be rejected by some people who prefer to sue the company. Google believes it faces potential liabilities in 18 states and the District of Columbia, as well as federal court.
The recission offer covers 1,105 current and former employees, as well as Google consultants who own the affected shares. The outstanding options, carrying exercise prices ranging from 30 cents to $80 per share, are held by 301 people.
It's unclear whether Wednesday's twist will affect the timing of Google's initial public offering -- a deal expected to raise up to $3.3 billion, with roughly half of the money flowing into the company's bank accounts. The rest of the money will be split up among Google's top executives and early investors who plan to sell stock in an IPO carrying a target price of $108 to $135 per share.
In Wednesday's filing, Google said it planned to complete the IPO "as soon as practicable," but didn't elaborate. Federal securities law prohibits Google from making public statements about the IPO beyond the information contained it SEC filings. The company's latest filing indicated the recission offer will expire sometime next month.
Google is currently letting prospective bidders register for an upcoming auction of 24.6 million IPO shares at www.ipo.google.com.
Once the registration period closes -- something that could happen later this week -- qualified investors can bid to buy a minimum of five shares through one of 28 underwriters participating in the IPO. If the auction is completed in a few days, Google's shares could begin trading on the Nasdaq Stock Market as early as next week.
A successful IPO might make the recission offer a moot point. Wednesday's filing said the stockholders that reject or don't respond to the recission offer will have their shares and option automatically registered under federal securities law after the IPO is completed. The shares then would become tradable after the recission offer expires next month.
Oops..
"A successful IPO might make the recission offer a moot point. Wednesday's filing said the stockholders that reject or don't respond to the recission offer will have their shares and option automatically registered under federal securities law after the IPO is completed. The shares then would become tradable after the recission offer expires next month"
Meaning if the stock is notably lower once the shares are tradable, the difference between that and the IPO open or other high price may be the lawsuit damage, assuming this isn't restricted stock.
I would steer clear of this offering altogether...
Seems like there are a lot of people who didnt learn from the first internet bust at all!
The only people making money on the deal will be the ones who are already in. Google may be great, but their offering is not for the common investor.
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