Details are vague, but Ars Technica published some interesting details in late 2003, the year preceding Google’s debut.Leaning on Ken Fisher’s contemporaneous reporting, here are the words used to describe the potential for a Microsoft-Google link:The same Ars Technica piece goes on to report that, yes, Google “appear[ed] to be in preparation to co… Finally, to gain experience with the market multiples approach, we will estimate a value of Google at the time of its initial public offering (IPO) back in 2004 using market data on Yahoo!
Not too bad, right. âFinancial Evaluation and Strategy: Investmentsâ received an average rating of 4.8 out of 5 based on 199 reviews over the period August 2015 through August 2016. Finally, the course will conclude by connecting investment finance with corporate finance by examining firm valuation techniques such as the use of market multiples and discounted cash flow analysis. Yahoo! Profit, net income here, exactly the same. So the estimate for the book value of equities, $2.2 billion. But again, this wasn't a surprise, right. The over-arching goals of this course are to build an understanding of the fundamentals of investment finance and provide an ability to implement key asset-pricing models and firm-valuation techniques in real-world situations. Google, even though they're not publicly-traded in the summer of 2004, they do have to provide past financial data. I was not involved in the details of the actual offering, however.An auction, at least in theory, should deliver the highest possible price for the company while giving individual investors, rather than just the fund managers who dominate the bookbuilding approach, the opportunity to buy shares. Look here at the estimates that we get for Google stock price from Ask Jeeves. So let's look at data from Google's financial statements here. So Google planned to have an IPO in the summer of 2004. We knew that going in. From a prior chart, I gave the market multiples for Yahoo and Ask Jeeves regarding price to sale, price to earnings, market-to-book. And when we use the market-to-book at Yahoo to value Google, we're getting an estimate on the order of $63 per share. So take this $143 million number here, add to it this $105 million from 2003, subtract from it this $58 million from the first half of 2003, gives you a trailing 12 months of net income as well. You would like to get a sense of how will the market value me. All right. And just to note, all the prices I report here in this exercise are on a pre-stock split basis. Huge real life value addition. How about the book value of equity? The company went public at $85, sold 22.5 million shares and raised over $1.9 billion.
For any valuation given the inputs, we can calculate a very precise number, carried out to the one-thousandth decimal point, but that really doesn't matter. So kind of a final take away from this kind of first pass analysis is, even when we focus as Yahoo as the comparable firm, we see big differences across the valuation multiple in terms of the final estimate for the stock price. Specifically, upon successful completion of this course, you will be able to: Okay. I have been writing on initial public offerings (IPOs) and investing for over 30 years and I speak publicly at IPO forums and seminars world-wide. So let's put all this data together. In their registration statement, we want to get sales and earnings numbers for Google that are also from the most recent 12 quarters so to match up with the Yahoo and Ask Jeeves accounting data. Google held its IPO on Aug. 19, 2004. So given the money that comes in from that sale, they expect their book value of equity to be $2.2 billion.
So to calculate the revenues of Google over the last 12 months, leading up to their August 2004 IPO, we'll take the sales on the first half of 2004, add it to the sales over all of 2003, and then subtract out sales over the first half of 2003.