Google Concedes 'Risk Factor' From Playboy Interview, Opens Bidding

The Internet search company also said it expected to announce the price of its stock price this week. Google, Mountain View, Calif., has suggested a price between $108 and $135 a share, but bidders can offer whatever they wish.

With 25.7 million shares for sale, the offering could raise $3.5 billion, which would make the IPO the biggest of the year and one of the top 10 of all time. At Google's top suggested price, the company would be valued at $36 billion.

On the same day it opened bidding, Google said in a filing with the Securities and Exchange Commission that a Playboy interview with founders Sergey Brin and Larry Page was a "risk factor" in the IPO. The interview was published Friday. The SEC is investigating whether the timing of the article's release violated securities laws.

Companies are barred from making any statements or take any action that could be construed as pumping up the price of a pending stock offering. Google denies that the interview, conducted in April before the company announced its IPO, violated securities laws.

"We would contest vigorously any claim that a violation of the Securities Act (of 1933) occurred," Google said in the SEC filing.

If a court found Google guilty of violating the act, it would be "required to repurchase the shares sold to purchasers in this offering at the original purchase price for a period of one year following the date of the violation," the SEC filing said.

It's unlikely, however, investors would sell the stock, if its value continued to rise following the IPO.

The Playboy troubles weren't the first time Google has raised the eyebrows of regulators. The California Department of Corporations is investigating Google for possible securities violations stemming from the company's issuing of stock and options to its employees between 2001 and 2004.

The company has acknowledged in previous SEC filings that it violated securities laws by issuing stock and options to employees without registering the shares with the agency. The company is making amends by offering full refunds, plus interest, to anyone who bought shares during that period. It will also buy back the options for 20 percent of the exercise price.

Google's offer, however, hasn't attracted much attention, given that the average price of the shares is $2.86, far less than the expected offering price

Would-be investors in Google's IPO had until 5 p.m. EDT Thursday to open, if they already didn't have one, a brokerage account with one of the 28 financial-services firms taking part in the stock offering. Lead underwriters are Morgan Stanley and Credit Suisse First Boston, a unit of Credit Suisse Group.

In its prospectus, Google has warned that its stock price is unlikely to jump after its market debut, since the experimental Dutch auction in which it is being offered sets the price based on what investors are willing to pay. Stocks offered in more traditional methods during the dot-com era of the late 1990s often leaped into the stratosphere after their debuts.

Analysts have said Google's near-term prospects could be dampened by a sagging tech sector and geopolitical turmoil. In addition, Google faces the risk of having its search product commoditized as it battles for market share with Internet heavyweights Yahoo and Microsoft.

In addition, the year, so far, has not been a stellar one for IPOs. As of Wednesday, 33 stock offerings have been postponed or withdrawn, according to Thomson Financial. More than half of the deals this quarter have priced below the estimated range.

For more on Google, see CRN.