IPO Values Google at $36bn

28 July 2004

Internet search giant Google is parading its wares prior to its upcoming stock market debut with a phenomenal price tag of between $108-$135 (€89-€111; £59-£73) a share.

This puts a maximum valuation on the company of up to $36.25 billion, the highest ever attained by a US company in an initial public offering.

The announcement on Monday set Wall Street abuzz, not least because of the unusual method Google has chosen for its IPO, due to be finalised next month.

Rejecting the traditional technique whereby the initial (often low) share price is determined by the company and its bankers, Google favours an auction to sell its shares, guaranteeing maximum prices for the stock.

Such high share prices have not amused many analysts. David Menlo of IPO Financial Network believes Google's IPO is priced "to the expectations and the hype, rather than the substance of a financial model" and warns that Google is taking a risk since shares may fall drastically after trading commences.

Potential buyers may also be deterred by the high prices and Google's minimum purchase requirement of five shares, amounting to $540, is no small potatoes for retail or individual investors.

Originally planning to sell $2.7bn of shares, Google has revised this to $3.83bn, or 9% of its stock.

Despite a current blip in its overall strong performance (Q2 revenue gains fell to 7.5% from the mighty 27% of the first quarter), investors will no doubt be falling over themselves to get their hands on one of Wall Street's hottest-ever properties.

Data sourced from: Financial Times; additional content by WARC staff