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Its astounding that Google is prepared to blithely follow through this week with its long-ballyhooed and apparently grossly bungled initial public stock offering, even as the Securities and Exchange Commission and individual states are starting legal inquiries.
Google Inc. is convinced that the huge sums of money it stands to make from this IPO will readily paper over whatever blunders it made in failing to register 23 million shares and 5.6 million options.
But I seem to recall that people usually get arrested, prosecuted and sentenced to prison for selling unregistered stock. However, Google appears to be saying that the legal niceties shouldnt matter because it was all due to an innocent mistake. In other words, lets do the IPO now and pick up the pieces later.
Besides, its not as though Google is a fraudulent concern with no real assets or business prospects. The companys success as the most popular search engine on the Internet promises to send the initial stock price well over $100 per share–a stratospheric level not seen since the height of the dot-com bubble.
All it needs to do to fix the problem, the company says, is offer to buy back the shares from the 1,406 people who received the unregistered stock at the original share price plus interest, for an estimated total of about $25.9 million. These shareholders have the options of rejecting the offer and suing the company.
But these shares are potentially worth at least $3 billion. At that price, what shareholder is willing to raise a stink about whether the shares were properly registered?
But shareholders will squawk plenty and file a blizzard of lawsuits if the SEC finds that the unregistered status calls into question their legal title to the stock. At this stage of the game, anything is possible. Google is telling its shareholders to take it on faith that the company will pay whatever fines or make whatever restitution the SEC orders to fix this legal muddle.
Next Page: Putting a price on haste.
Price of Haste
With so much at stake, is it really necessary for Google to press ahead now? It would certainly be better for the company—and its shareholders—to call a halt to the IPO until the SEC has completed its inquiry and clarified the legal issues as well as the potential costs.
Google had asked the SEC to approve its registration paperwork by 4 p.m. Tuesday, clearing the way for the IPO to start as early as the following day. But the SEC declined to make a decision Tuesday, raising questions about how long the commission might delay the IPO.
The ball is now in the SECs court. It would certainly make sense for the SEC to put the IPO on hold until it has the information it needs to clarify the legal status of the stock. If its just a matter of shuffling a few papers and paying a fine to make the stock legal, so be it.
But Googles unseemly haste to push this IPO through does nothing to shore up investor confidence in the companys stock and in the integrity of the overall stock market.
Googles actions are too reminiscent of the worst abuses of the all-too-recent dot-com market bubble, in which absurdly high stock prices were supported by arrant speculation.
If Google truly believes in the value of the company and its long-term prospects, it can surely take the time to do whatever is necessary to fix a problem that clearly arose from gross negligence.
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