Google Cancels Spring IPO 246
securitas writes "Google fans and potential investors will be disappointed to learn that they must wait a while longer before they can own a piece of Google. The Times of London's James Doran reports that Google's IPO plans are on hold. CEO Eric Schmidt appears to think that market conditions are not right. When pressed for details about the delayed IPO, Schmidt said, "An IPO is not on my agenda right now." A commentary about the delayed Google IPO follows. Mirror at Australian IT."
Re:ugh (Score:5, Informative)
Re:ugh (Score:5, Informative)
Re:ugh (Score:3, Informative)
There is the Google Search Engine Appliance [searchtools.com] thing, which must have a healthy profit margin. I doubt that's going to be all that significant a contribution though - so I guess there is more profit in throse Sponsored Links than might be expected.
Re:ugh (Score:2, Informative)
Furthermore, I get the impression that their business model uses google.com as advertising for their licensing model.
Re:Good thinking, Google (Score:2, Informative)
Re:Good thinking, Google (Score:5, Informative)
It's not quite as simple as that. First off, the IPO would only be for a portion of the shares now held in private. So Google insiders would still hold significant control. Second, there are disclosure rules pertaining to buying up shares. The SEC requires shareholders to file statements once they cross thresholds in ownership. Third, Google could implore a number of various defences against any "take-over", including a share rights agreement (aka poisin pill), staggered terms for directors, etc. For one company to buy out another, it either has to be a friendly deal between the parties, or hostile - offers shareholders $$$ to tender their shares to the acquiring entity.
The reason for IPO-ing is either 1) to raise capital for growth, expansion, etc. - Google seems to be doing fairly well so far, and money is still cheap enough that they could tap the debt markets or private placements before going public, or 2) (which is likely more the reason), to provide liquidity for the current shareholders - the currently management team is sitting on millions of dollars, but they don't have any easy means to convert their ownership position into cash.
By having a public float, Google would have to disclose their financial information (as well as other stuff). With all that is happening, increased competition, maybe they take a wait and see approach, especially if they aren't in dire needs for cash.
Re:ugh (Score:5, Informative)
http://www.theage.com.au/articles/2004/01/15/1073
Meanwhile, there are reports that Yahoo! and Microsoft are preparing next-generation search technologies to beat Google, the world's most popular search engine. Microsoft, according to one report, is working on a "Google killer" and analysing the Web with its own internet spider, a piece of software critical to building search engines.
Re:Intensive purposes? "Intents and purposes." (Score:2, Informative)
Gov't regulation that's why (Score:4, Informative)
I remember reading an online article about it. Apparently, it's a real pain in the ass. Basically you have to do the same amount of paperwork as a public company, but without the benefit of the extra money.
Re:ugh (Score:2, Informative)
Google makes most of their money from ads [google.com] (keyword searches, etc.); licensing of their technology to third-party search engines like Yahoo! (although Yahoo! is dropping Google [com.com]); and, selling search appliances [google.com], which do lots of non-Internet work as well.
Re:Gov't regulation that's why (Score:5, Informative)
A private company must report its finances once it has more than 500 common shareholders--or stock-option holders--and $10 million in assets, according to section XII(g) of the Securities and Exchange Act of 1934. That means a private company must file quarterly forms with the Securities and Exchange Commission (SEC) that disclose operating expenses, profits, partnerships, shareholders and many other details--a laborious process that can cost as much as $2 million annually.
Re:"Market conditions are not right?" (Score:3, Informative)
This is good for the company, because not only do the private owners still totally control the company, but they:
a) can buy back the shares on the open market for less than they sold them if they want them back
b) can sell more shares later if they need more capital (since they didn't sell as many shares on the IPO to make the initial capital)
Re:Bravo Google (Score:3, Informative)
It can make the decision makers who care about the product gunshy, and drive them to 'middle of the road, risk free' behavior. Innovation and advancement doesn't come from this type of behavior.
It's a sad day when the decision makers have to consider the value of their stock tomorrow more highly than the viability of their company in ten years. Why should the CEO care? He won't be there in ten years - he'll have moved on with his rapidly-excercised stock options and golden umbrella payouts; He's liquid enough already (unless he makes really stupid decisions) that he'll be rich even if he never gets another job.
Re:ugh (Score:3, Informative)
Don't forget the Google search appliances that are sold/licensed/maintained. I know of numerous Fortune 500 companies that use the appliances for their internal sites.
In addition, when I was searching for jobs I checked up on Google. There were a few positions in the DC area that required high level security clearances, indicating that the government is using the appliances internally as well. To what extent, we don't know.
It's not the Times of London!!! (Score:2, Informative)
Yahoo IS leaving Google (Score:3, Informative)
Re:Conditions really aren't right (Score:4, Informative)
Re:ugh (Score:5, Informative)
- Surely not the ads.
Why not the ads? A simple back-of-the-envelope calculation shows it's at least plausible.250M searches/day [searchenginewatch.com] * 3 ads/search * 1-2% clickthrough/ad * 365 days/year * $.10/clickthrough = $274M-$548M/year.
The 250M searches/day may be low since it's from Feb 2003. It also doesn't include Google's Adsense [google.com] program, putting Google ads out on other sites, which probably doubles the amount of page views.
Google has unusually high clickthrough rates and payments per click because of their AdWords [google.com] targeted advertising. Ads are matched to keywords and then optimized, with the most effective ads showing more and least effective dropping away.
Certainly enterprise revenue (licensing the Google search engine for use on other sites) is part of their revenue, but I suspect the majority is from advertising.
Re:Bravo Google (Score:4, Informative)
I split the company into 1000 shares:
- 700 I keep.
Following the IPO, fortune continues to smile on us and the stock goes up to $1000/share. My friendly employees want to cash out their 199 options. No problem: I give them 199 from my stash, mourning the $2,000,000 it costs me but leaving me with 501 shares and control of the company. Life is good.I give my superstars options on 199 shares at $1.00.
300 I sell in an IPO, taking the company public
Same scenario, except this time I gave 400 options. Now when my happy friendly employees want to cash out, I have to either go out into the market and buy those shares at $1000 to give them, or issue more shares. Either course of action has problems from my point of view. At best it will reduce the value of my holdings; at second worst it will leave me no longer in control of my company; at worst it will zero out my net worth.
That's about where Microsoft stands today: if any significant number of their "old hands (say post-1995 hires) decide to cash out their options in a single quarter or even a single year, Microsoft has a bit of a problem on its hands.
Of course, that scenario has been around since before the dotcom bust, and it hasn't happened yet, so maybe it won't. But let Microsoft report just one quarter of declining revenue and the results might be interesting.
sPh
Thank God. (Score:3, Informative)
As it is (as a privately held company) they can take such news as information and plan carefully and intelligently. Sure they're concerned, sure the VC folks are telling them they need to watch out. But it's nothing like watching your company's valuation drop 60% overnight and be left with fear of lawsuits and hostile takeover based on rumors.
Going public is way overrated.
Cheers.
Re:Bravo Google (Score:2, Informative)
1. Intrinsic value--this is the in the money value (An MS employee who can buy 10 shares for $20 has about $7 (rough estimate) of intrinsic value on their options).
2. Time value--This is the sticky part. This is the value placed on the fact that at some time in the future, any option (even some $400 Amazon options). This is the value that is different for each person. If you want to explore theroy on time value the Black-Scholes model approximates this fairly well.
To show why they are so regularly used, lets use an example staring Cisco. Cisco grants an employee an option to buy a share at $26 per share (They closed at $26.20 today, but I like the round numbers will be easier to follow). This option lasts for 10 years, the longer an option is good for the more valuable it is because you have more time to reach a payoff. The employee might assign some value to this option, but probably much less than the $5 that the maket [yahoo.com] is paying for the time value of a three year option that have a strike of $25. They employee cannot sell his option so it really won't be useful to him until he can excersise it. Anyway Cisco would assign zero expense on their income statement to other shareholders for this option. Once the option is in the money they would include it in their diluted share count. Now after a few years passes, let's say January of 2007, Cisco is trading at $30. They employee is now ready to excersise his option. At this point Cisco takes $25 from the employee and gives him a share of Cisco (reducing everyone's percentage ownership because there is now one additional share, and the same company. The comapny still does not record any expense (in their statements to their owners) associated with this transaction. However they do report a cash increase of $25 for the sale of a share.
However on Cisco's tax return (corporations file them, too) they report a $5 expense in the 2007 tax year. Managemnet increases their cash balance, pays the employee, reduces their taxes, and doesn't report any downside to their owners until the option is in the money (it goes into their share count at that point). Multiply the single share by several million and you can see why managment likes this a lot.