Google Ipo

Case Analysis 1: Google IPO

1.(4) Discuss reasons for Google’s going public. There are three reasons for Google going public. First of all, there were growing pressures by shareholders to go public. Before 2003, founders Page and Brin attributed much of Google’s success to the long-term planning possible in the context of privately held corporation, unaffected by the pressures and demands of a volatile stock market focused on short term results. It meant that the company did not have to comply with onerous SEC disclosure regulations, and it could thus divulge little information and maintain an important informational advantage vis-à-vis publicly quoted competitor and corporate clients. By 2004, however, the growing number of Google’s shareholders would have triggered disclosure, so the informational advantage of private ownership was no longer sustainable. Secondly, the competition among search technology industry was getting more intense, Google needed to go public to get more resources. Microsoft announced in April 2003 that it planned to develop a search technology that would integrate web search more closely with the Windows operating system. Google expected that “Microsoft increasingly use its financial and engineering resources to compete with us.” (“Preparing for The Google IPO: A Revolution in The Making?”, Constantinou, Dinos, et. al., 2004). Then, Google would require more resources (financial and engineering) in order to be able to compete well with the other competitors which can be obtained through IPO. Last of all, as more employees became stockholders, Google had to make certain public filings in compliance with the securities laws, and these public filings would have required some disclosure of Google’s business strategy. Since Google had grown rapidly, it did not have to go public and could hold its business strategy privately. However Google lost its informational advantage of private ownership, it was pressured to go public.

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