Google Conversion Process “What was the conversion process followed by Google? How did Google engage the issues of converting from a group of proprietors to investors with an executive team including a formalized operational strategy and concerns for public images In that respect, Google was created in 1 998 by expounders Sergey Bring and Larry Page (Finale, 2012). It was a leading company on innovations around the world as such compared to Apple. Like no other, they lead the way in innovation, as it was the base of the company’s success and culture.
Their innovation strategy was to improve world information by organizing it and making it universally accessible and useful to everyone (An, n. D Google’s mission is to… ). Therefore, the conversion process was intended to expand operations, compete against larger corporations such as Yahoo and MS and within their first year, they had an abnormal growth Of 135% overtaking competitors (Google n. D; Pagan, Payment, & Singles, 1998). Less than decade, from 2013 to 2014, there has been a 20% growth from $37,422 million to $45,085 (Google information table).
This excellent strategy, especially during the looming financial crises as a result was a two-fold play. First, to overtake the big competitors, raise capital by going Dutch auction, and bypassing conventional bank investments that carry a high commission Eugene, 2005). Instantly Wall Street firms that controlled this particular initial public offering, (PIP), deposited cash into Google’s bank account of 1. 67 billion dollars. Secondly, other formalized strategies for building its image by going public trading, they received press coverage, thus, that increased consumer awareness of Google’s brand.
Most important, the incredible exposure of the Google brand would take the company to a prestigious new level with the large competitors. Hence, the benefits of creating a good image by Google going public trading company, the SEC have strict federal regulations. These laws enacted by Congress improve oversight of accounting practices of the corporation with criminal penalties if the company managers commit fraudulent reporting (Earthward and Brigham, 2011 Going Public trading shows corporate stability through transparency; therefore, appeasing investors who may land larger companies.
As a reminder during the beginning of 2000, many investors lost faith in the system stocks, as the corporations were plagued with corruption such as Enron, Tycoon, MIMIC and many more technology companies. By the conversion process of going public, an added CEO Eric Schmidt is appointed follow by Larry Page. This was a good image for the company; in addition, the underwriters backing strengthened relations with investors by going public thus, the results of public trading option made employees wealthy by purchasing and selling stocks, such as 473 million dollars went to the executives and investors (Eugene, 2005).
Investment Banker “Did Google use an investment banker initially to assist in the conversion process? Why or why not? Did that decision change, and if so what was the reasoning? Who, if anyone, benefited, and how did they benefit? How does this affect your opinion about using an investment banker in underwriting? At the beginning, Google kept an impervious sealed lip with the underwriters investment bank because it was against their innovative culture and losing full managerial control over the company (Eugene, 2005).
Why, these underwriters have a pre-set price in comparison that initial share price pre-PIP bidding process. Thus, of the strategy of maximizing profits through Dutch auction and averting the large fees that the underwriter investment bankers charges. Equally important, this process tries to maximize profits by trying to sell to the individual for highest paid price. It is known as the clock auction because of the five-second clock where the auctioneer can stop the clock (Eugene, 2005; L I, & Quo, 2013).
Still they needed backing from the investment bankers with help for underwriters to strengthen relations with the investors and acquire the PIP. The results, of switching to investment bankers leveled the trust and stability. Therefore, investors benefited as such, that by February of 2015 the stock’s prices doubled (Hammerer, 2004 as cited on Eugene, 2005). In my opinion, I am in favor of investment banking even though I find that Dutch auction is rare and risky for large corporations, but it id meet Bring and Page business cultural goals for innovation and collegiality (Eugene, 2005).
Equally important, the Dutch auction process was slightly modified, to meet collegiality with small investors, therefore, observing their strategy it is determined that Google is unique because of the lucrative results of making small investors millionaires, and they could keep a portion of managerial control, thus, maintaining it collegiality and innovation. Selection method of Investment Banker “How does a corporation select an investment banker? What characteristics are most important to consider in hiring an investment banker? A corporation selects investment bankers based on pricing and how much profit to earn.
They select investment bankers who have a strong relationship with large institutional investors (Reheard, and Brigham, 2011). It is a fact; small investors has many challenges, and perhaps impossible just to get to the ground floor. Therefore, they have a greater probability to buy in the aftermarket. Thus, if by some miracle you do make it, then substantiation suggest that the PIP will under perform over the long run. In the case with Bring and Page played the strategy of not using investment bankers perhaps to rive down the price offering, but the best practice is truth.
In fact, it is an advantage of truth telling, because PIP share is based upon the investor’s interest in the contribution (Ross, Westfield, & Gaffe, 2012). Therefore, developing trust is one of the characteristics. Other characteristics are the experience that the investment banker has to add value to your company, as it is the most complicated part to the business to add wealth to your business. Maximizing value is no easy task, as you would have to look into successful business closure, from the beginning to the end.
To build to the trotters point, an experienced investment banker should have a robust marketing department with market research. Other characteristics of the financial analysis, they have strong relationship capitals that have access to other investment bankers with public relations (Karakas, 2015). However, the capability to go further with all the assistance and counseling needed to be successful because of the financial crisis the banker should understand your goals and take Google to another level through socio-economic growth.
Corporate Value and Initial Stock Price Determination “What determined Googol‚s total value when it went public? How was the initial offering price for Google’s stock determined? ‘ First, the determination of Google’s total value when it went public was in the shareholders value. Top management focuses on cost to improve profits, but this is too complex. Therefore, they focus on the revenue referring to the pricing process (Karakas, 2015). If they go as well low PIP, then in the end, they will under perform. However, the base cost is an attraction to investors as cost will be low for reinvestment.
Secondly, when base fixed assets exist, intuitively base operation’s cost exists hence; this was an added value for Google (Chem.., Morrison, & Wilhelm, 2014). With their base operational costs, and their pricing process, both value has a positive impact as it delivers investment advantages with lucrative cash flows, taking the company to another level in public marketing (Simon, Butcher, & Sebastian, 2003). Finally, the price had to be competitive to foster their innovative culture of having small investors be part of the company.
To acquire, perhaps in pricing follow the book building method to trade Ipso where investment bankers gather non binding indicators of interest from large investors (Chem.., Morrison, & Wilhelm, 2014). They use this information to set prices for the shareholder rationed off to smaller investors motivated by the ROR investment of 25% or more. Description of the Stock Acquisition Process “How did investors acquire Google stock before and after the involvement of an investment banker? ‘ Bring and Page wanted to continue collegiality and the innovative culture.
Therefore, employees and investors had a direct link with Google (Eugene, 2005). They knew those investment bankers would limit their innovative organizational culture, an attribute that makes the company successful. As a result, they had many challenges and kept secret which erection to take, as such should they go through investment bankers or auction. They needed investment banker to stabilize their image and attract investors, but the Dutch auction satisfied their innovative culture and control. However, from the lucrative cash flows, strong image among investors they needed to stabilize the company.
Therefore, the investment bankers took control of negotiations separating those investors in corporate interest. Investment bankers believe that large established investors are less motivated to auction Ipso because Of swarming of retail investors thus free ding the institutional investor (Chem.., Morrison, & Wilhelm, 2014). Evaluation of Conversion Decision “What is your personal evaluation of Google’s decision to convert to a publicly traded corporation? What were the positive and negative results of the conversion? Overall, was this an appropriate investment strategy?
Will the conversion now create opportunities to gain capital for continued growth? ‘ My personal evaluations of Google’s decision to convert to a publicly traded corporation are the results of its growing pains. As an illustration, their class A common stock of 1 9,605,052 initial public offering took place on Wall Street in August 1 8, 2004, thus, going public trading created stability among the large competitors even though they lost full managerial control by sharing stocks but keeping at least more than 50% ownership (n . A. , ND. , Gone public).
From the conversion processes the positive results were, its outcome as it surpassed their competitors through growth, thus saturating the market as quite evident in the increase of shareholder’s wealth. Presently, their growth is over seventy offices around forty countries around the world (N. A. , n. D. , Google’s location). Equally important, through the Ipso it increased accountability and transparency to the public and investors as prior to Ipso requiring filing with the SEC, SSL registration (Eugene 2005). A strict rule 1933/34 applied to the corporation.
With the attraction of complying with federal laws and ethical standards, employees and small investors became wealthy a plan from the beginning of maintaining an image of organizational stewardship and loyalty. Other opportunities as such ever since they went through the conversion process, they purchased multiple companies thus fixing their weaknesses. Recently, they have purchased 21 companies, and en of their leading companies is Nest, a transition from Apple (Blooded, 2014). Their capital diversification and capital growth are astounding, all from the success of selling their shares thus, raising brand new capital for further growth.
Another advantage of going public trading is that Ipso introduce unused markets thus, making it possible for new financing opportunities (Eugene, 2005). Effects of Conversion on Autonomy and Privacy “How did the conversion to a public corporation affect the company’s autonomy and privacy? ‘ As a corporation grows, they require an increase of transparency over finances. Equally important, by going public trading corporation loses full managerial control, as they must share with investors (Conjugally, 2011).
In that respect, those who buy equity shares have rights to the company’s strategies and direction as part of added wealth to the investor, they have an input. They have rights of governance in the contribution in both aspects of profits and risks. It is limited by the investment and bounded to contract and responsibility. However, the complexity of its privacy and autonomy, regardless that a corporation such as Google is unable to shield their documents was the overall dilemma caused y sharing management through PIP of stocks (Pullman, 2014).