Inside the Google IPO

Eric Schmidt, chairman and CEO of Google, tells a good story in the May 2010 issue of Harvard Business Review – taking us behind the curtain of the initial public offering for the cyber-giant that is everywhere in our lives.

Investor relations practitioners will enjoy this tale (“How I Did It: Google’s CEO on the Enduring Lessons of a Quirky IPO” – available free on the HBR site).

Schmidt dwells on the Google culture that was determined to be different. This IPO was different … from the decision to do a modified Dutch auction offering … to an unusual letter from the founders in the registration statement (“An Owner’s Manual” for Google’s Shareholders) … to the Playboy interview during the quiet period, which Google added to its S-1 to cure the selective disclosure issue … and – especially – those values Google holds dear (“Don’t be evil” and the like). See the registration statement here. You don’t have to buy it all to appreciate the story.

Somehow it worked out, despite a so-so market in Summer 2004. Schmidt recalls:

We flew overnight to New York to watch our shares start trading on the Nasdaq on Thursday, August 19. We showed up in the morning, bleary-eyed. That day the Wall Street Journal had run a front-page piece with the headline “How Miscalculation and Hubris Hobbled Celebrated Google IPO,” and CNBC commentators were talking us down all morning. I remember thinking as we headed down to the Nasdaq trading floor, We’re screwed.

Just before the trading started, there was a countdown on the floor: 5-4-3-2-1. We watched the first trade, but it wasn’t at $85 [the agreed pricing with the investment bankers]—it was at $100, an 18% increase over our IPO price. … The volume was huge.

All day long the stock price never went down. It closed at $100.30.

We were now public. Thrilled and exhausted, we flew home to California.

The investor communications effort back in ’04 was unconventional, and Wall Street naysayers said GOOG wasn’t going to make it out of the IPO starting blocks.

But Google raised $1.67 billion on that August day, selling a minority of its shares and establishing a market capitalization of $23 billion. Today, the market value is $161 billion. It’s been a pretty good ride for the Googlers, wouldn’t you say?

© 2010 Johnson Strategic Communications Inc.

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2 Responses to “Inside the Google IPO”

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