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Google May Have Illegally Issued Shares

http://story.news.yahoo.com/news?tmpl=story&ncid=1212&e=4&u=/ap/20040805/ap_on_hi_te/google_buyback&sid=95573501

Google Inc. may have illegally issued more than 23 million shares of its stock to hundreds of employees and consultants, injecting an unexpected legal risk into the online search engine leader's highly anticipated IPO.

The Mountain View-based company disclosed the possible violations Wednesday in a prospectus offering to buy back the affected shares and outstanding stock options for a total of $25.9 million, including interest payments.

...

It's unclear whether Wednesday's twist will affect the timing of Google's initial public offering — a deal expected to raise up to $3.3 billion, with roughly half of the money flowing into the company's bank accounts. The rest of the money will be split up among Google's top executives and early investors who plan to sell stock in an IPO carrying a target price of $108 to $135 per share.

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etc.

(witty comment here)

www.MarkTAW.com
Thursday, August 05, 2004

Which pile are your shares in Joel?

chris
Thursday, August 05, 2004

According to comments elsewhere, this isn't really news: it was disclosed in the original filings with the SEC.

mb
Thursday, August 05, 2004

Too cheap or too stupid to hire an accountant with a clue?

Inquiring minds wnat to know....

wmeconsulting.us
Thursday, August 05, 2004

This is another example of this malicious monopoly exhibiting it's bad business practices to shut down competition...

...oops, I guess it said Google.  We all know everyone else but MS is a saint.

Clueless Ranter
Thursday, August 05, 2004

Somebody should tell the guy who runs http://www.google-watch.org ; another reason for him to get up in arms!

Python, Monty
Thursday, August 05, 2004

The article I read said they failed to mention the previously issued shares, not that the previously issued shares were issued illegally.

saberworks
Thursday, August 05, 2004

How did Joel end up with Google shares?

www.ChristopherHawkins.com
Thursday, August 05, 2004

This reaction by Michael Gartenberg sums it up nicely:

"Hmmm... let's see. You own options on Google at $.30 a share but Google might have given them to you illegally, which is a wee bit of a problem for them. Fortunately for Google, they can fix this problem and they've offered to give you the $.30 a share in a buy back and call it even... plus interest. You could help them out and agree to this idea or you could hold the shares and sell them post IPO for a gazillion dollars.... Which would you do?"

http://weblogs.jupiterresearch.com/analysts/gartenberg/archives/003504.html

Just me (Sir to you)
Friday, August 06, 2004

Issuing shares without declaring them, even for a private company is a nono, issuing shares without declaring them if you're launching a prospectus to sell the company (which is what an IPO is), is even less acceptable.

I think Google may be estopped from offering anything except the original value of the share, or offering a like for like share (rounded up to the IP price) so diluting those that have these shares.

I don't think those that actually have the shares can do much in the way of changing that or preventing the IPO.

If Google have some prior agreement or memorandum that's on the books showing the intention to issue these shares ahead of time then its all likely to be a storm in a tea cup anyway and these 'founder' or 'pioneer' shares will be worth whatever the actual price is.

Simon Lucy
Friday, August 06, 2004

The other issue in play here is that pre-IPO shares were issued to non-approved investors, i.e. anyone who doesn't have a net worth above some magic threshold is assumed by the SEC to be a clueless rube. It can be done legally, but requires a waiver. So Google is screwed two ways. I don't see how this can be resolved in time for the IPO to continue on original schedule.

Rob VH
Friday, August 06, 2004

But immediately after the IPO they would have that net worth.

Oh the irony.

www.MarkTAW.com
Friday, August 06, 2004

...with great power comes great... assininity.

Kenny
Friday, August 06, 2004

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