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ranged from $23.2 to $32.1 billion with an average of $29.0 billion. This is higher than most independent

estimates reported in the press. While two news reports forecast a maximum market capitalization of

Google at $30 billion, typical reports forecast a maximum of 20-25 billion.25 The actual market

capitalization on the close of the first day of trading (August 19) was $27.2 billion, only 6.16% less than

the average prediction over this early forecast period. By the next day, the market capitalization had risen

to $29.4 billion, significantly closer to the early IEM forecasts. This early indication of market

capitalization would be valuable in setting initial price ranges and, as a result, makes our prediction

markets very different from existing when-issued markets in other countries.

After Amendment 4 was filed on July 26, the IEM forecasted market capitalization rose, likely in

response to the relatively high preliminary price range ($108-$135 per share). This indicated a

capitalization range of $29.3 billion to $36.6 billion with a midpoint of $33.0 billion. The IEM prices

gave an average prediction of $33.9 billion from July 26 through August 8. That this is near the midpoint

of the price range (instead of at or above the top of the range) contrasts with what one would expect from

the when-issued market evidence. There, the eventual market capitalization of typical IPOs significantly

exceeds the top of the indicated range (Aussenegg, Pichler and Stomper, 2004).

The IEM predicted market capitalization had fallen to $30.4 billion by the date of the 5th

Amendment (August 9) and to $28.3 billion by the date of the 6th Amendment (August 11). From

August 11 through August 17, the IEM forecasts ranged from $28.2 to $28.9 billion and averaged $28.5

billion, just 4.8% above the actual August 19 capitalization of $27.2 billion (a price of $100.34 per share).

The IEM closing prices the night before the final prospectus was approved forecasted a market

capitalization of $28.3 billion and, given the number of shares in the prospectus, a market price of

$104.34. The actual closing market capitalization was only 3.84% less than this final IEM forecast.

25

Wall Street Journal stories on 10/24/03, 4/23/04, 4/26/04, 4/28/04, 4/30/04 and 5/10/04 all capped the estimated market capitalization at $25 billion. A separate Wall Street Journal story on 4/30/04 stated only a $25 billion estimate. A Wall Street Journal story on 5/13/04 estimated the range to be $20 to $22 billion. Washington Post stories estimated the market capitalization at $15 to $20 billion on 1/13/04. Stories in the Wall Street Journal on 7/19/04 and the Washington Post on 5/2/04 both give a maximum of $30 billion. Later articles did not make independent capitalization estimates. Most articles simply quoted price and capitalization ranges that were derived from Google’s own indicated price range and quantities as given in their prospectus.

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