1. Google IPO Tim Mulrooney Jim Gipson

2. Background Info  Founders Larry Page and Sergey Brin  Met in 1995 when they were doctoral students in computer science at Stanford.  Launched Google in September 1998 in a friend's garage in Menlo Park, Calif.  Named the company after the mathematical term "googol," which stands for a 1 followed by 100 zeros.

3. Google Facts  In 2003, employed 1,907 employees, more than sixfold the number in 2000.  Generates 95 percent of its revenue from advertising.  Had an audience of 60 million unique visitors, or 40 percent of all U.S. Internet users.

4. Income Statement

5. Filing for IPO  Very private about company finances  2003 Earned $105.6 million on revenue of $961.8 million Operating profit margin of $571.8 million.  2004 Earned $63.9 million on revenue of $389.6 million in first quarter.

6. July 26, 2004  Google files IPO with SEC August 13, 2004  Seeking to raise $2.7 billion  Selling 24.6 million shares 271 million shares outstanding About 9% of total shares

7. July 26, 2004  Underwriters: Morgan Stanley and Credit Suisse First Boston  Predicted share price: Between $108 and $135 each  Eighth largest IPO in history

8. Predicted Market Cap  $108 – $135 * (24.6)  $2.66 - $3.32 billion  9% of total market cap  $29 - $36 billion  S&P 500 average - $21.25 billion

9. Auction Process  “Modified Dutch Auction”  A different IPO for a different company.  Democratize availability of stock: Reform original IPO process of allowing Wall Street to give large allocations to favored customers.

10. Dutch Auction  Intended to ensure the distribution of shares to investors whose bids are at or above the price that clears all shares in the deal.  Similar to how the US Treasury raises funds for our government.

11. FED needs to raise $7 billion for US Treasury $0.5 B @ 5.310% $1.5 B @ 5.315% $2.5 B @ 5.320% $4.0 B @ 5.325% $3.5 B @ 5.330% $2.0 B @ 5.335%  All investors will receive a yield of 5.325%  Leads to more aggressive bidding. Investors at the top will get a better deal than they bargained for.

12. Aug 13, 2004  No IPO…  Delayed a week because of logistics details. Couldn’t enter everybody in the auction system.  Morgan Stanley - “This is all new to us, but we just hit a speedbump”

13. August 18, 2004  Google stock (GOOG) opens at $100.01, after being priced at $85.00  lower than original ($108 - $135)  # shares offered: 19.6 million  Much less than original (25.7 million)

14. August 18, 2004  Total revenue: 19.6 million shares * $100 = $1.96 B  Actual revenue raised from IPO: $1.67 B  Why? Some shares sold were already held by employees.

15. Many Google employees became instant millionaires  Approximately 250 million shares for nearly 2,000 employees.  Average: (250,000,000 shares * $100 / 2,000 employees) $12.5 million / employee

16. Today  GOOG - $458.16 Long run investors? - $$$ # shares outstanding = 311 million Market Cap - $142.47 billion  End of year 2006 Revenue - $10,604,917,000 Net Income - $3,077,446,000  PVGO – 100% Google has not and does not plan to pay any cash dividends in the future.

17. Google ideals – changing after IPO?  Rich employees "Once a person has the sense of the wealth, the commitment to the company and where it's going can fall off"  Workforce tensions Only about 1,000 employees became millionaires  Loss of control Newfound responsibility to shareholders Employees are still selling off their shares (class A)