Google on Friday dealt another blow to Wall Street's traditional way of handling new stock market listings as it appeared to do away with the idea of using a core group of banks to act as co-lead managers on its initial public offering.
The internet search engine company named a list of 31 banks and brokers that would act as underwriters for its $2.7bn IPO, which is expected later this summer. However, other than Morgan Stanley and Credit Suisse First Boston, which had already been named to lead the deal, none of the others were singled out to act as co-leads.
The Google decision will come as blow to blue-chip Wall Street firms like Goldman Sachs, which had counted on playing a key role in the most widely-anticipated stock market listing in more than a decade.
In an amendment to its listing prospectus filed on Friday with the Securities and Exchange Commission, Google grouped big-name firms like Goldman and Merrill Lynch with smaller brokers such as M R Beal, Samuel A Ramirez and Utendahl Capital Partners.
Would-be investors in Google will be able to submit bids to any of these 31 institutions, with many of the banks and brokers accepting orders over the internet, the company said.
The novel auction that Google will use to set its stock price and allocate shares to investors could be completed within just two hours of the SEC giving it the formal go-ahead for the IPO, the company said. The 31 underwriters will pool all the bids they receive in a central "order book", which will be used as a guide when setting the final price. This will give Google far more control over the process than most companies have when conducting an IPO.
However, since Google has retained the right to set the price at a different level to the one that a pure auction would require, and since the order book will be kept secret, investors will have little insight into how the eventual price is acutally set.