Google Playboy Article May Raise Concerns

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Google plans to open the auction for its hotly anticipated IPO Friday and set the final price next week, despite legal questions about a newly published Playboy interview with the founders of the online search engine.

It hasn't worked out that way, at least for me. According to my broker, I'm not eligible to participate in the Google auction. The underwriters' definition of "average investor" for this IPO apparently includes above-average knowledge, experience and money. At best, I have two out of three.

I'm willing to bet that many people who were hoping to get in on Google will likewise be disappointed, since it's been little publicized that brokers will have the final say on who can participate. It takes more than simply opening a trading account.

After opening my Ameritrade account and obtaining my Google bidder ID number last week, I wanted to research the company. Google has targeted its shares at between $108 and $135 each, but it's up to me as an investor to determine what I think the company is worth so I can place an informed bid.

After reading the prospectus, I searched online for professional research on the stock. I didn't find much, sadly, though Standard and Poor's researchers believe its value to be around $121 to $127.

I wanted more. I logged into my Ameritrade account, since the online brokerage provides research links for its customers. I clicked on the IPO Center and, unlike last week, found it was open for business.

There was only one IPO there " Google " so I clicked on that and an eligibility questionnaire popped up. I was a little confused at first, but then recalled a couple of lines buried in the 211-page prospectus saying that each individual underwriter would have to determine a bidder's eligibility to participate in the IPO.

Google needs the Securities and Exchange Commission to approve its IPO registration statement before it can complete the stock sale " a process the interview complicates, predicted Michael Zuppone, a former SEC attorney.

"I don't want to rain on their parade, but I think this interview is going to cause regulatory concern. There could be consequences," said Zuppone, now with Paul, Hastings, Janofsky and Walker in New York.

Securities attorney David Walek of Ropes and Gray agreed that the interview would be a serious problem for almost any company preparing an IPO. But he said Google may be an exception to the usual rule because of the widespread publicity swamping the company since its IPO filing in late April.

"There already has been so much written about this company that the SEC may conclude that this doesn't really change the mix that much," Walek said.

SEC spokesman John Nester and Google spokeswoman Cindy McCaffrey declined to comment Thursday.

The SEC sometimes imposes a "cooling off" period when a company involved in an IPO releases any information that deviates from its IPO registration statement. The SEC is especially sensitive to promotional remarks while a company is gearing up for an IPO, securities attorneys said.

Regulators cracked down on in May when the company's CEO, Marc Benioff, cooperated with an article published in The New York Times on May 9. After the article appeared, the SEC forced the San Francisco-based company to delay its high-profile IPO. completed its IPO six weeks after the article appeared.

Playboy spokeswoman Theresa Hennessey said the magazine conducted the interview with Page and Brin on April 22 " a week before Google filed its registration statement. None of Google's top executives have granted interviews since the company's IPO filing.

Securities attorneys contacted Thursday said they doubted the timing of the interview would matter to the SEC because Page and Brin knew then that an IPO filing was imminent.

"The SEC draws a distinction between what a company can control and what they can't control, and this is something they could have controlled," said Bob Clarkson of Jones Day in Menlo Park, Calif.

Google's decision to proceed with the IPO auction may be an indication that the company is confident the Playboy interview won't result in a delay, Walek said.
But Clarkson disagreed. "Beginning the auction still doesn't preclude the SEC from stepping in and slowing down the offering."

No one stands to lose more from an IPO delay than Page, 31, and Brin, 30.

The former Stanford University graduate students plan to sell a small portion of their Google stakes in the IPO " divestitures expected to provide $100 million windfalls for each. If Google realizes its goal of pricing the IPO at a minimum of $108 per share, Page and Brin would each be worth at least $4 billion on paper.

In the Playboy interview, both Page and Brin cover mostly familiar ground about Google's history, the company's unconventional business approach and their aspirations to make the world a better place.

They also express tremendous pride about Google's accomplishments during the company's nearly six-year history.

"Google is a useful tool in people's lives," Brin told Playboy. "There are extreme cases, we're told, when Google has saved people's lives."

Brin said, "Someone wrote that he was having chest pains and wasn't sure of the cause. He did a Google search, decided he was having a heart attack and called the hospital. He survived and wrote us."

At other points, Brin boasts that "ads on Google work" and describes the search engine as a "powerful tool."

Page touts Google as a significant improvement over many of the Internet businesses that launched IPOs during the dot-com boom of the late 1990s.

"We have more than 150,000 advertisers and a lot of salespeople," he said. "Millions of people use Google. It's a completely different thing."

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