average underpricing reported by Smart and Zutter (2003) for IPOs of companies with dual-class shares
(like Google) between 1990 and 1998.
B. Timeline of Events
Google’s potential IPO was first reported by the Wall Street Journal on October 24, 2003. The
Journal reported that Google had contacted an investment banker and that an IPO was under
consideration for 2004. Speculation about the IPO continued until the initial filing with the SEC on April
29, 2004 (SEC file number 333-114984). Google filed nine amended prospectuses. Its final prospectus
was approved on August 18, 2004 and officially filed the next day. Table I lists the filing dates and
summarizes major changes included in each amendment.
The initial filing contained little information about quantities of shares.6 There was no initial
price range and there was no target IPO date. The fourth amended filing on July 26 supplied projected
share quantities, the initial price range ($108 to $135) and an August target IPO date. Issue quantities
were revised in Amendment 5 on August 9 and in Amendment 9 on August 18. Amendment 9 also
adjusted the initial price range down to $85-$95. The final prospectus, declared effective on August 18
and filed on August 19, set the IPO price at $85. On August, 19, Google’s stock opened at $100.00 and
closed at $100.34. On August 21, the San Francisco Chronicle reported that the underwriters had
exercised the full over-allotment option to purchase 2.94 million more shares.7 Google stock closed at
$108.31 on August 20, even with this exercise.
Missing were the total quantity of shares expected after the offering, the number sold to the public by the company, the number sold by existing shareholders, the size of the over-allotment option and the numbers of shares subject to various lock up rules. While the joint issue of new shares and sales by existing shareholders may seem unusual, Jenkinson and Ljungqvist (2001, p. 3) point out that “many” IPOs share this feature. According to prospectus rules, these shares could be purchased by the investment bankers from pre-IPO shareholders (at a net price of $82.6161) only to cover shorts created in the IPO (sold to the public at $85).