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Last Updated: Thursday, 5 August, 2004, 05:34 GMT 06:34 UK
Potential hitch for Google float
Google's headquarters
Some 9% of Google's shares will be sold off in the IPO
Search engine Google has admitted it may have breached stock market laws in the US.

In a filing to the US market watchdog, Google said it had neglected to register almost 30 million shares and options issued to staff.

It is now offering to buy them back - albeit at prices way below the $108-$135 at which its flotation is set.

It is unclear whether the warning could affect the timing of the $3.3bn flotation, due to end within days.

Google's shares could start trading on the technology-heavy Nasdaq market as early as next week.

Drop in the ocean

Google's filing to the Securities and Exchange Commission explains that its oversight puts it in potential breach of securities laws both nationally and in a total of 18 US states, as well as the District of Columbia.

Buying back the 23.2 million shares and 5.6 million options - a process called "rescission" - would cost the company $25.9m, a tiny expense when set against cash reserves of more than half a billion dollars.

But any liability the firm might have may survive the rescission offer.

Some of the 1,406 people whose shares and options are at issue may well decided to reject Google's offer, waiting instead to sell up on the open market.

Indeed, one early investor with more than a million shares and one company official with about 50,000 shares have already said they will not take part, Google said.

Five-share minimum

The high price for Google shares in the flotation is the result of its decision to use a "Dutch auction" process to allot shares to potential investors.

It was intended to put small investors on a more even footing with big institutional funds and influential investors, who have traditionally been given better access to newly-floated shares.

Potential investors submit bids that include the price they are willing to pay and the number of shares - five at minimum - that they are willing to buy.

Some critics, however, charge that the process has overvalued the shares, making them likely to fall in price once they hit the markets.

After Google's auction is completed, the shares will begin trading on the Nasdaq stock market under the ticker symbol 'GOOG'.

Google plans to sell 14.1 million shares itself, with another 10.5 million to be sold by existing shareholders.

The 24.6 million shares being sold in the stock market launch, or initial public offering (IPO) represent 9% of the company's total shares.

Google was launched from a Californian garage on 7 September 1998 by Stanford University post-graduates Page and Brin.

The search engine gets 200 million queries a day.

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