July 8, 2004

Google offered more warnings again on any would-be investors who might be getting overly excited, as they wait to buy Google's IPO.

In a financial document filed with the Securities and Exchange Commission, Google emphasized again that its shares are at high risk of dropping in value right after the deal -- rather than soaring, as some did during the Internet bubble.

That's largely because of the unusual way Google is setting the price for its initial public offering of stock, or IPO.

Google's latest financial documents gave investors more details about risks that could make buying Google stock a losing proposition, either in the short run or in the long run.

Those risks, according to Google, include nebulous ones, such as the risk that ``corporate culture'' could change, or more specific risks like spammers who could damage Google's prized search results.

Google also beefed up the section of the document that spells out how Google's unusual plan for its IPO, using an auction style of bidding for stock, poses risks for unwary investors.

Under the auction, investors will bid for Google shares, indicating how many they want, and at what price. Google will generally award shares to the highest bidders. After looking over the array of bids, Google and its bankers will set a single price that all winning bidders will pay.

But under this method, Google warned, overenthusiastic small investors might run up the IPO price to unreasonable levels, driving away larger investors like mutual funds or pension managers. That would make it more likely that Google's stock will fall once it starts trading, Google warned.

``Successful bidders should not expect to sell our shares for a profit shortly after our Class A common stock begins trading,'' Google said.

Experts say the SEC, which is currently reviewing Google's financial documents to make sure they are complete, may be worried that small investors are having visions of huge, bubble-era first-day profits from Google's IPO. So SEC lawyers could be asking Google to spell out the risks very clearly.

Google's executives also noted that if, as expected, they decide during the deal to sell extra shares, the stock will be more likely to fall rather than rise after the deal.

Separately Wednesday, Google found itself facing a trademark complaint by the owners of a children's Web site called Googles.com.

Stelor Productions, which owns and operates Googles.com, said it started trademark proceedings with the U.S. Patent and Trademark Office against Google for infringement of its brand name.

The original creator of Googles trademarked the name in 1997, the year before Google incorporated as a company. Google had no comment on the complaint.

Source: Mercury News

        

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