Technology History | Nasdaq MarketSite — The Auction That Priced Google at 85 Dollars

Google's bankers wanted a conventional offering. The founders wanted an auction, and through the summer of 2004 it was not obvious which would survive.

The registration statement filed on 29 April 2004 carried an unusual attachment: a letter to prospective shareholders from Larry Page and Sergey Brin.

It opened with a warning rather than a pitch. "Google is not a conventional company. We do not intend to become one."

What followed was a Dutch auction run through Morgan Stanley and Credit Suisse First Boston, in which any registered bidder could name a price and a quantity, and the clearing price would set the offer.

The market was unimpressed. An indicated range of US$108 to US$135 was cut to US$85 to US$95 in mid-August, and the shares priced on the eighteenth at US$85, the bottom of the reduced range.

19,605,052 shares sold, raising US$1.67 billion and valuing the company at about US$23 billion.

Trading opened the next morning, 19 August 2004, and Google's executives spent it in the studios of Nasdaq's MarketSite on Times Square, Larry Page among them, moving under heavy security.

The first public trade in GOOG printed near US$100. The stock closed at US$100.34, up 18 percent, having ranged between US$95.96 and US$104.06.

That pop is the case against the auction. A stock that jumps 18 percent on its opening day was sold below what buyers would pay, which is the outcome the auction format was meant to prevent.

Most of the coverage that week treated the offering as a stumble, and the reputational damage to auction pricing outlasted the day.

The MarketSite still occupies the base of the tower at the north end of Times Square, its cylindrical screen visible from the Broadway plazas. The broadcast studio inside is not open to the public.

A note on sourcing: reports differ on the share count, with some giving 22.5 million shares and US$1.9 billion raised, figures that appear to include shares beyond the base offering. The 19,605,052 figure is used here because the contemporary wire reports and the offering documents agree on it.

Sources: Google's Form S-1 and the founders' letter, 29 April 2004; Reuters, AP and BBC reporting of 19-20 August 2004. Cover photo: vobios, CC BY 2.0, via Wikimedia Commons, showing the MarketSite tower in June 2003, fourteen months before the listing.