SEC clears Google to float as price and size cut

The US Securities and Exchange Commission (SEC) last night declared effective Google's registration statement for its initial public offering (IPO). The SEC move clears a major regulatory hurdle allowing the company to start selling shares to the public. The shares could start to trade on the Nasdaq market sometime today.

Earlier yesterday, Google slashed the estimated price range and size of its initial stock offering, as a lack of demand for its shares brought the high-flying search engine down to earth.

The cut in the price, from an estimated range of between $108 (€87.60) and $135 to between $85 and $95, was seized on by critics who said the original range was too high for retail investors.

Institutional buyers had also indicated they would stay away from the stock, in the expectation of sharp price falls after the (initial public offering) IPO.

Shares of Google's rival Yahoo, and those of other internet giants like eBay and Amazon have fallen sharply since June.

Investors have been wary of IPOs in recent weeks. Sixteen IPOs have been pulled since the beginning of August.

Markets are struggling to determine whether the world economy is improving or set to decline and are worried investors will not buy their shares.

Potential Google shareholders have also been dismayed by series of mishaps that have delayed the company's planned share sale, such as its failure to register the shares awarded to employees, and an interview with Playboy magazine that drew concern from the SEC.

Google had also raised eyebrows on Wall Street by pricing its shares by holding an auction, which anyone could register to enter, rather than asking bankers to set its IPO price. The narrower price range indicates the underwriters, a group of 28 banks led by Morgan Stanley and Credit Suisse First Boston, have a better idea of where the final price could fall. Still, investors can bid below the range, thus the final price could be lower than $85.

Instead of raising up to $3.5 billion, based on the high end of the earlier price range, Google could now raise $1.9 billion. It would create a company with a stock market value of as much as $25.8 billion.

As a company, Google still plans to sell 14.1 million shares, but existing shareholders will now sell 5.5 million shares, down from 11.6 million because of the "new price range".

Company executives, including co-founders Mr Sergey Brin and Mr Larry Page, have decided to sell fewer shares during the IPO.

Kleiner Perkins Caufield & Byers and Sequoia Capital, venture capitalists which supported Google, no longer plan to sell any shares in the offering.

The sale could be the second-largest internet IPO after Genuity's $1.9 billion sale in 2000.

The IPO was meant to challenge the traditional methods Wall Street uses to sell US companies to the public. It was supposed to be easier for potential investors, especially individuals, to win shares.

It was also designed to help the company avoid a first day surge in price.

The flaws that have marred the process may make companies considering a similar process think again, bankers said. But others pointed out that the price range cut showed the strength of the auction mechanism because the price was being determined by investor demand. -(Financial Times Service, Reuters)