KEY POINTS
- 20 years after its 2004 IPO, Google is now worth over $2 trillion.
- Its vast influence has led to the Department of Justice considering breaking it up.
- The IPO boosted the reputation of Morgan Stanley banker Michael Grimes, known as “Wall Street’s Silicon Valley whisperer.”
- Despite a weak IPO market and a new offering model, Google’s stock saw a solid first-day return, starting with a market value of over $27 billion.
- Since its IPO, Google’s stock has continued to rise, contributing to its growth into a tech powerhouse.
20 years ago, as Michael Grimes, a banker at Morgan Stanley, helped steer the initial public offering for the young company behind the ubiquitous Google search engine, one of the most predicted IPOs of that decade, he was among the first offered access to a novel email service. He could choose any address, so naturally, he inquired about [email protected].
However, Sergey Brin, Google’s co-founder, interjected a prescient warning. Brin reminded Grimes that Gmail showed promise to proliferate, so such an address would inevitably invite a barrage of unwanted correspondence.
Looking back, Grimes acknowledges regret for passing up the coveted email, though the IPO solidified his standing as a vital liaison between Wall Street and Silicon Valley just as tech began reshaping investment worldwide. He deems Google’s public offering as transformative, whose value has multiplied over 7,600-fold in two decades.
The combined market worth of companies Grimes ushered to the public market stretches into the trillions. Some debuts proved rockier, like Facebook’s in 2012, while others pioneered novel structures, such as Spotify’s 2018 direct listing. However, Google’s remained groundbreaking. “It inaugurated a new era,” Grimes stated. “Google and subsequent mega-caps altered how we work.
Now operating under parent Alphabet, the expansive tech giant encompasses a sprawling realm of enterprises from its foundational search and advertising operations to YouTube, its Pixel smartphones, cloud infrastructure, autonomous vehicles in development, and research into generative AI models. Its all-encompassing nature and market dominance has prompted antitrust scrutiny from authorities eyeing a potential breakup.
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Representatives for Alphabet did not immediately reply to requests for comment.
Two decades after its incipient public offering, the internet industry was still recuperating from the dot-com crash early in the millennium, and financiers approached new offerings with caution. Rather than pursuing a traditional IPO, Google pioneered a novel process termed a Dutch auction, aiming to make participation equitable across investors by welcoming all who wished to take part regardless of profile.
The founders’ IPO letter opened by asserting, “Google is not a conventional company. We do not intend to become one.” They then introduced their philosophy of “don’t be evil.”
Brin and Page hoped for fairness, Grimes said. “Their view was: wait, if an engineer left another firm and wanted to invest $10,000 in Google, why deny her the full amount if she’ll pay over the institutions? Mainly as the auction would allot shares solely by price and funds pledged rather than status of the bidder that was the real innovation.”
Grimes added that some banking interests discouraged the unusual approach, insisting it diverged from norms, but others, like his own, were eager to collaborate with Google in this new model.
Winning the coveted “left lead” on the IPO was and still remains a fiercely competitive race. The Morgan Stanley team eagerly embraced the format, designing a prototype and rigorously testing it against a billion bids.
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For the road show, they divided into three distinct squads. Co-founders Brin and Page each headed their own, while CEO Eric Schmidt spearheaded the third.
By most accounts, the IPO proved successful. Google overcame a feeble IPO market and an untested offering model to generate a decent first-day return and a market valuation exceeding $27 billion. From there, the stock kept appreciating considerably.
It would demand more than a decade for the principles behind Google’s IPO to gain traction. Consumer technology brands like Facebook (now Meta), Twitter (now renamed) and LinkedIn (now possessed by Microsoft) would pursue the conventional IPO route.
However, several of the high-profile listings between 2019 and 2021 did incorporate factors that aligned with Google’s aim to democratize access. Airbnb offered hosts the opportunity to purchase shares at the IPO price. Uber and Lyft made shares accessible to its drivers, and Robinhood gave customers access to its IPO.
Assessing the impact of Google’s “don’t be evil” motto and how it’s aged proves more complex. Grimes declined to reflect on the Google of today, saying he can’t comment on clients.
Google now stands accused of stifling innovation by U.S. and European regulators, and although the company remains at the forefront of the generative AI platform shift, search and advertising, still its lifeblood faces its biggest existential threat in decades.
