The Idea: once Google announced its on purpose to walk public, in 2004, every eyes to be on the unorthodox strategy. Here’s how it play out.

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The Idea: as soon as Google announced its intention to go public, in 2004, every eyes to be on its unorthodox strategy. Here’s exactly how it played out.


The Idea: as soon as Google announced its on purpose to go public, in 2004, every eyes to be on the unorthodox strategy. Here’s how it play out.


It occurred six year ago, however I quiet remember every detail of our journey to ending up being a publicly company. It to be a uniquely “Googley” endure that come this day says a lot around who we are.

An IPO can readjust a company. Countless in the media seemed specific that if we went public, the Google ethos wouldn’t survive. A public offering would it is in “one the the worst things that might happen come Google,” claimed Danny Sullivan, editor that the Search Engine Watch newsletter and also a well-regarded market commentator. Human being predicted that we would suddenly be separated into haves and have-nots top top the basis of how many shares of Google stock every of us held. The talent would certainly cash out and quit. A new focus on pleasing wall Street would cause us to lose our prized objectivity and independence. Arising the facilities to end up being a public firm would dull ours edge. Ultimately, people feared that as Google transitioned native a bright young start-up come a mature public company, the would lose the quirky heart that had made the so innovative.


Google Stock due to the fact that the IPO $85 respectable 19, 2004$581 in march 11, 2010

Click below for a larger image of the graphic.

None of the happened. And also I firmly think that at our main point we space the same firm we to be then—just a lot of bigger. Although the is danger to check out too much into a solitary event, ns think among the factors we have actually held on come our values is the we chose an unconventional route to walk public. Larry Page and Sergey Brin, Google’s founders, began their “Letter from the Founders,” i m sorry was consisted of in our IPO prospectus, by saying, “Google is no a typical company. We perform not intend to become one.” They go on to warn potential investors the we would certainly invest in risky projects that might result in residence runs—or might never pay off. Selecting a brand-new path to follow doesn’t always produce the ideal results, and also the road can be bumpy. Google’s roadway to the IPO was anything yet smooth.

People feared the in walk public, Google would lose its prized objectivity and also independence.

The agency was founded back in 1998. I come on board 3 years later. Although us were farming rapidly, in both employees and also revenues, we were in no hurry to walk public. Yet given our size—and, much more particularly, the truth that we wanted our employee to have actually equity in our cultivation enterprise—in beforehand 2004 we found ourselves in the place of having actually to release our financial outcomes to comply through U.S. Securities laws. At the time, those laws required Google to end up being a publicly reporting agency once it had actually 500 shareholders, and to file the connected financial statements within 120 days of the finish of the year in which we crossed that mark.

We had until so late April 2004 to paper the vital registration statement with the Securities and also Exchange Commission. Yet the securities legislations did not call for us to have actually an IPO in the traditional sense. In fact, we can have simply become a publicly reporting firm without selling any kind of shares come the public.

We confronted three choices: We might restructure come get ago below 500 shareholder (meaning, essentially, uncover a way to buy earlier shares from ours employees); us could continue to it is in a private firm but at the very same time live with having actually to report our financial outcomes like any type of public company; or we can go public. Not surprisingly, us explored part unconventional alternatives, such as trying to build an internal sector for ours employees’ Google shares. In the finish we choose to take the usual course for a venture-backed an innovation company and also make an initial public supplying of our common stock. However, we want to structure our IPO in a means that was anything but usual.

The netherlands Auction

We pride ourselves on trying to perform things right, and we perceived this process of walk public together a gigantic IQ test. Exactly how should we market shares? in ~ what price? Whom have to we bring in to help us? What was the ideal way—the Google way—to carry out this?

In debating those questions, we reviewed as much data about prior IPOs together we can get our hands on and also agreed top top a few things us did not like about the common process. We didn’t choose the “pop” often experienced through successful technology companies once they went public. The difference in between the IPO price and also the price of a company’s stock at the finish of the an initial day or main of trading appeared to united state to it is in money that should properly be in the hands of the company. Yet ordinarily, huge institutions with connections to the underwriting syndicate room the just group enabled to purchase those share at the IPO price, and they upper and lower reversal them a couple of days later on for a healthy and balanced profit. Somehow the didn’t feel right for Google. We want something much more transparent and open—and we wanted our users to have actually a chance to take part.

As we were reviewing our alternatives, us were drawn to strategy championed through WR Hambrecht, an investment bank based in san Francisco, which said that auctions to be a far better way to raise resources than the traditional underwritten IPO. In what is known as a dutch auction, a firm would collection bids from all interested investors and then team them by exactly how much every investor was willing come pay. The firm (and its bankers) would then relocate down indigenous the height bid until it got to the highest possible price in ~ which it can sell every the share it wanted to offer. The firm could select that price (or, for a range of reasons, a reduced one) and then sell all the shares that were bid on at the favored price or greater as soon as the stock to be traded ~ above its exchange.

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We favored this approach. That was constant with the auction-based company model we used to sell our ads, so we felt we interpreted the underlying dynamics, and it had actually a solid intuitive appeal because that us. We additionally liked the idea of opening up ours auction come everyone—retail investors and traditional institutional buyers. We hoped that an auction would perform a far better job than the traditional method of setting a price for our shares—and would allow our re-publishing price to continue to be stable after we went public.

I recognize this may sound choose baloney, yet we resolved decisively top top the dutch auction after ~ we obtained a letter indigenous a tiny old lady—or at the very least someone who declared to be a tiny old lady. She wrote something follow me the lines of “I don’t recognize why i can’t make money from your IPO the method the stockbrokers will.”

We thought she had a point around the simple fairness that the system. So we determined to go v our version of the Hambrecht model, even though the would add considerable complexity to our IPO. No company the dimension of Google had ever before done such a thing. Our auction would certainly be ~ above a substantially larger scale than other auction-based IPOs. We would have actually to develop systems to assistance that enhanced scale. And those systems would must be the review by the SEC. Wall Street viewed our decision as arrogant. The analyst Henry Blodget created in Slate, “Participating in the Google IPO auction is gambling, not investing, and also the most likely outcome is a rubbish of money and also time.”

Undaunted, we operated through how to structure our IPO, and we stopped connecting with the press. The SEC’s “quiet period” requirements prevented united state from talking about our business in the run-up come a feasible initial windy offering. Under those rules, providers are encouraged to make sure that in all product respects, only the prospectus speaks because that the company. Because Google remained in the media spotlight during this period, human being came the end in droves to criticize our business, ours management, our culture, our IPO—almost every element of that we were. And because we had to continue to be silent, us weren’t able to defend ourselves, correct misinformation, or try to reassure the public.