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It looks like Google is finally ready to begin trading but investors should still steer clear.
August 19, 2004: 12:49 PM EDT
By Paul R. La Monica, CNN/Money senior writer

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NEW YORK (CNN/Money) - If you type in the term "Google overkill" into Google, you only wind up with 10 results. I'm surprised it's not a lot more.

Aren't we all a bit Googled-out at this point?

GOOG finally started trading on Thursday, trading around the $100 mark. The company had set an initial $85 price after completing its Dutch auction process on Wednesday.

But now that it has launched, it is pretty clear that the Google IPO is more of a circus sideshow as opposed to a seminal event for tech. And I think investors should still steer clear of the stock until at least next month...if not longer.

Setting aside all the business and valuation risks -- which I detailed in a recent column -- the handling of the offering raises serious concerns about management.

First, what was the company thinking trying to foist its IPO on the public during the dog days of summer? Typically, the IPO market takes a breather during August. Bankers go on vacation. Trading volume is sluggish. And this summer in particular has been a particularly bad time for the markets.

It would be one thing if Google was just running up against negative market sentiment. But there are also some serious issues that the SEC had to scrutinize before it could in good conscience green light the deal.

The Playboy magazine interview may not have disclosed much about the company that people didn't already know. (I read the transcript in Google's prospectus...scout's honor!)

But it was silly for co-founders Sergey Brin and Larry Page to agree to the interview a mere week before filing to go public.

While the interview may not have technically violated the SEC's quiet period rules, it still looks bad. Were Brin and Page really naive enough to think that if the interview was published before the company went public, that wouldn't raise some eyebrows?

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If so, that's not exactly a ringing endorsement of their leadership skills. One fund manager who told me he's staying away from the deal for now joked that he's a bigger fan of Yahoo! because it has "adult supervision," referring to CEO Terry Semel.

Sure, Google has Eric Schmidt, formerly of Novell and Sun Microsystems, as its CEO. But Brin and Page will own a large percentage of Google's Class B shares, which have 10 times the voting power of the shares the company is selling to the public.

And if you're confident in management's ability to keep Google growing at a healthy clip, then wouldn't it be nice if the company had more to say about what it plans to do with some of its IPO proceeds.

Of course, nobody expects Google to disclose something that would wind up giving an edge to its competitors. But Google has been extremely tight-lipped about what it may do with the cash from the offering. And that has alienated some large institutional investors.

Google Inc.
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"The lack of guidance about what they will do with the proceeds was not well received by the buyside community," said Mark Bettencourt, a partner with the business practice group and co-chair of the corporate finance and securities group at law firm Testa, Hurwitz & Thibeault, LLP.

There's also the issue of Google failing to register some shares and options that it awarded to current and former employees and consultants. The SEC is now looking into that, as are several states. These aren't minor concerns.

It would have been nice if Google tried to resolve them to the best of its abilities before going public instead of opening itself up to fines and possible lawsuits once it's already trading. That's not beneficial to shareholders.

So Google is trading. But smart investors should sit back and let things settle out in the aftermarket before considering buying the shares.

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