Shares of Google Inc. (GOOG) began trading publicly on the Nasdaq Stock Market (search) on Thursday and surged 18 percent in the culmination of a unique and bumpy initial stock offering process.
Google sold 19.6 million shares at $85 each, raising $1.67 billion, the biggest IPO so far by an Internet company.
The stock started at $100.01, $15.01 higher than its $85 initial offering price, and ended trade at $100.34, up $15.34, or 18 percent.
"There were a fair amount of institutional buyers that stayed out the auction but came in (today)," said Martin Pyykkonen, an analyst at Janco Partners. "I see a floor in the $90s."
Google Founders Sergey Brin (search) and Larry Page (search), guarded tightly by security, were at the stock market's broadcasting facility in Manhattan to mark the start of the trading session.
A few minutes before the shares officially opened for trading, the market saw a false start when the shares appeared to debut at $136. But a Nasdaq official said this was the result of two trades that "should not have gone through." Nasdaq declined to comment further.
Initial shares of the world's most popular search engine were priced late Wednesday at $85, the low end of a range revised downward just hours earlier, humbling expectations for the most ballyhooed Internet company public stock offering since the dot-com boom went bust.
Still, the offering remained one of the biggest and most highly anticipated for an Internet business, surpassing most of the hot tech issues of the 1990s. It made billionaires — at least on paper — of Brin andPage, who started Google six years ago in a garage.
The $85 price values the world's most popular search engine at $23.1 billion, more valuable than companies such as Amazon.com Inc. (AMZN), with a market cap of $16 billion and Lucent Technologies Inc. (LU), valued at $13.5 billion.
The initial share price was short of Google's original expectation of $108 to $135 a share. It also comes at the bottom of Google's downward-revised range it made on Wednesday, when it also reduced the number of shares to be sold to 19.6 million from 25.7 million — a move that was expected to buoy prices.
"The good news for Google is that it didn't price below the low end," said Tom Taulli, co-founder of CurrentOfferings, an IPO research company. "If it had priced below the low end, maybe there could have been some selling pressure."
The IPO raised $1.67 billion through the sales to the auction bidders after the price was set at $85. If the stock had priced at the high end of the original estimate, Google would have raised as much as $3.6 billion and given the company a market capitalization as high as $36 billion.
"When you finally cut through the hype, economic rationality wins out," said Bob Clarkson, a securities attorney at the Menlo Park-based Jones Day law firm who did underwriting work for many IPOs, including Yahoo Inc.'s. "Bidders who wanted to buy the stock have done a reasonably hard-nosed analysis and they say they like $85 better than $108 or $120."
The bumpy IPO process has created several clouds over the company that has been criticized for being too idealistic, arrogant and reckless since it began the IPO process four months ago.
The company eschewed Wall Street tradition and decided that the final IPO price would be set by an auction. Its founders wrote an idealistic letter in its prospectus, outlining the company's "Don't Be Evil" mantra and plan to avoid the trappings of traditional companies.
But problems started accumulating.
In one case, Google said the Securities and Exchange Commission (search) had "requested additional information concerning the publication" of an interview with Brin and Page that appeared in September's issue of Playboy magazine. That was a potential violation of the SEC's rules against talking publicly before an IPO about information that is not included in the prospectus.
Google also has disclosed that the agency has launched an informal inquiry into its issuance of millions of pre-IPO shares and options without registering them.
But few deny that Google is both very popular and prosperous.
Since it was founded in 1998, it has always been something of an oddball. Its search engine design has no flashy ads but a simple, quick-loading layout. Its search algorithm out-powers rivals. Its name became synonymous with Internet search.
The Mountain View, Calif.-based company, which makes money by selling text advertising, managed to prosper as a private company even while other dot-coms were collapsing. Now, as the technology industry is just recovering, Google stands to prosper even more.
According to Google, pre-IPO shareholders expect to sell 5.5 million shares, less than half the 11.6 million originally planned. The company itself will sell 14.1 million shares, which is unchanged from previous filings.
Page collected $41.1 million and Brin got $40.9 million, but that pales in comparison to the more than $3 billion each still holds in Google shares.
Venture capitalists won't be offering any of their shares initially, canceling major payouts. Google board member John Doerr of Kleiner Perkins Caufield & Byers was to have sold 2.1 million of his 21 million shares; Michael Moritz, another board member and a partner at Sequoia Capital, was to shed 2.4 million of his 23.9 million shares.
But Yahoo Inc. (YHOO) and America Online Inc., which were early investors in Google, still plan to sell. Yahoo, now one of Google's biggest rivals, is selling 1,610,758 shares; AOL will unload 743,745, according to the filing. At $90 per share, Yahoo would collect $145 million, while AOL, part of Time Warner Inc. (TWX), would reap $66.9 million.
Reuters and the Associated Press contributed to this report.
Get all the stories you need-to-know from the most powerful name in news delivered first thing every morning to your inbox