Google's share giveaways may have been illegal
Published: 05 Aug 2004 08:20 BST
Google may have run afoul of securities laws when it doled out millions of shares to employees and consultants over the past three years, according to a document filed on Wednesday with the Securities and Exchange Commission.
The company, which is preparing for a hotly anticipated public offering, is offering to rescind more than 28 million shares because it said it failed to register them under federal and state securities laws, according to an amendment to the company's IPO prospectus.
Google offered to purchase more than 23 million shares sold to 1,105 employees and another 5.6 million stock options held by 301 people, according to the filing. The affected shares and options were issued between September 2001 and June 2004, at exercise prices ranging from 30 cents to $80 (£43.75) per share.
"These option grants and stock issuances may have violated the Securities Act of 1933 and the state securities laws" of 18 states, including Arkansas, California and Colorado, as well as the District of Columbia, according to the filing.
By rescinding the shares, Google seeks to address legal concerns surrounding the issuance of the shares. The company is offering to buy back shares sold equal to the value of their "strike price," or issuance price, plus interest. It is also offering to purchase the options for 20 percent of their value. One 5 percent shareholder of the company has declined to accept the offer, according to the filing.
Google said it will pay for the stock and option purchases with its cash reserves. As of June, the company had about $550m in the bank. The buy back offer is valid through September of this year, according to the amendment.
A Google representative could not be immediately reached for comment
Google, which filed to go public in late March, is expected to raise as much as $3.3bn in one of the largest-ever IPOs. In recent weeks, the company set the price range for its shares between $108 and $135 a share, of which it plans to sell 24.6 million. The company will trade its shares on the Nasdaq stock exchange under the ticker GOOG.
The company recently began allowing people to register to buy shares for its offering at the Google Web site, ipo.google.com.
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