Google Admits To Potentially Illegal Share Issue

by Glen Shapiro, LawAndTax-News.com, New York

06 August 2004

Online search portal, Google has offered to buy back some 23 million shares and 5.6 million stock options prior to its initial public offering (IPO), over concerns that their issue many have been in violation of state and federal securities laws.

In documents filed with the US Securities and Exchange Commission (SEC) on Wednesday, Google revealed that it had neglected to register the shares and stock options, issued to employees and consultants between September 2001 and June 2004, with the securities regulator, and that it therefore feared that:

"These option grants and stock issuances may have violated the Securities Act of 1933 and the state securities laws" of some 18 states.

The firm is offering to buy back the shares from those holding them at their issuance price, and the options at 20% of their value.

However, observers have suggested that if the firm's IPO goes off without a hitch, Google's oversight may lose its importance, as if shareholders reject the buyback offer, or simply fail to respond, their shares or options will be automatically registered under federal securities laws following completion of the IPO, and will be tradable once the recission period ends.

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