Google Inc might be in hot water with the US Securities and Exchange Commission (SEC) over a recent interview by its founders with Playboy Magazine which coincidentally hits the streets on the same day as its share auction.
According to a posting on the Wall Street Journal’s Website, the SEC is investigating if the Californian Internet search engine may have violated the quiet period ahead of its widely anticipated IPO next week.
In the interview Google’s founders Larry Page and Sergey Brin boast generally about the company’s rapid growth and how an IPO might impact the culture of the company and its prospects going forward.
What’s gotten the SEC hot under the collar is not so much the content but the timing of its publication – which officially hits newsstands today, the same day that Google’s share auction kicks off. However some subscribers have already received the issue in the mail.
The SEC is looking into whether the interview violates regulations that restrict what executives can say or communicate to the market while preparing their companies for an IPO. During this quiet period the SEC is particularly sensitive to any promotional remarks made by the company. Usually companies take no chances and keep their mouths shut.
Earlier this year the SEC similarly cracked down on Salesforce.com Inc’s CEO Marc Benioff for his involvement with an article published in the New York Times just six weeks before the CRM software company completed its IPO.
Playboy however argues that the interview with Page and Brin was taken before Google filed for its IPO back in late April. But it’s doubtful that the SEC will take this into consideration since at the time both founders knew that an IPO plan was in the works.
The SEC probe is the second unsettling event for Google this month. Last week Google scared investors by hinting it may have illegally issued shares to past and present employees. Perhaps someone should have told Google that its auction date falls on Friday 13th.
At this stage it still remains unclear whether the SEC probe could change the company’s timetable in what is turning out to be a far from straightforward auction-IPO process. While Google’s decision to go-ahead with the auction despite the threat of an SEC probe might be interpreted as confidence, it by no means precludes SEC action to delay the actual offering itself.
According to some Google, once the darling of Wall Street, is developing an image problem that seems to be turning off some potential investors. Reports that Page and Brin bragged about the Google search engine saving lives during the Playboy interview certainly doesn’t help and is likely to alienate more investors from what many perceive as two smug billionaires in the making.
One financial analyst succinctly notes the founders are simply trying too hard to be unique and cute and that may eventually backfire on them in media circles and more harmfully on Wall Street.
Google expects the auction is expected to be complete sometime early next week before it announces the initial offering price – estimated at between $108 and $135 per share which values the company at more than $36bn.