Deconstructing the Google S-1 ipo filing
The Google IPO mania is here and it appears that Dan Gillmor’s hopes have come through. This seems as if it is a landmark public offering in terms of the company, the attittude and the way the ipo is done. Notes here as i get through the s-1 sec filing:
- the most untraditionel opening of a prospectus. A very strong message from the founders outlining their vision for the company and how they intend to do it their way
- shares have been split into two classes to let the founders and the management retain control. A highly controversial move these days, but imho worth the respect considering how they manage the company. Also a testiment to the apparent battle the founders have had with the vc’s pressing for liquidity
- the WHOLE offering will be a dutch auction model (pioneered by Bill Hambrecht for technology offerings). This means that we won’t see any of the absurd ipo procedures we saw in the bubble and that the market truly will set the valuation. Also that the proceeds will get in Google coffers and not some friends of the investment bankers that flip their shares. But also a highly experimental thing to do with such huge demand. But respect full.
- revenue for the 2003: 961,874,000 $ with a income of 342,464,000 $ before taxes. An income margin of around 35%! Taking into account option charges that probably are temporary the income is over 500,000,000 $ - a margin of 50%.
- revenue for q1 2004: 389,638,000 $. Income: 155,232,000$ before taxes. Just extrapolating the numbers with the growth could mean revenues around 2 billion and income of around 800 million $ before taxes for year 2004.
- total assets above 1 billion $. Total assets after the disclosed estimate of 2,7 billion $ in proceeds from the offering just under 4 billion$. This could get way higher if the auction price gets high (depending on how many insiders cash out in the process - imho the only mixed signal in the offering - but probably a condition from the vc’s).
- proforma book value per share as of march 31,2004: 2,96$
- 1,907 employees.
- orkut is a subsidiary of Google Inc, Orkut LLC.
- Establishment of a Google Foundation with approx 1% equity in Google and 1% of income. Interesting move instead of the founders setting foundations up for themselves. Probably inspired by salesforce.com
- “Between February 2001 and February 2003, the registrant issued 446,000 shares of common stock as consideration for four acquisitions. The acquisition of Pyra (Blogger) is one those four.
All in all. This is the real thing. It feels like reading Netscape’s prospectus in 1995 - but 9 years later with strong values, a good business model, good incomes, true leadership from the founders, a fair distribution model for the shares, a foundation to distribute some of the wealth,etc.
It feels like we’ve come somewhere the last 9 years in terms of how business is integrated into society and humanity. Respect, Larry and Sergey! A lot of people had high expectations for how you would do this since you have a great responsibility on your shoulders since you’ll be kickstarting a new wave of innovation - and you came through - for all of us.
(Short term the media frenzy might take the stock up and down, it might open too high, etc. - but this is a long term play).