Google founders' Playboy interview may raise concerns

Securities attorneys said Playboy's interview with Google co-founders Page and Brin could change the company's IPO timetable.

Google Inc plans to open the auction for its hotly anticipated IPO on Friday and set the final price next week, despite legal questions about a newly published Playboy interview with the founders of the online search engine.

All bidders must already have obtained one of the registration numbers that Google has distributed during the past two weeks. Google and its insiders hope to raise about $3 billion by selling stock at a price ranging from $108 to $135 per share.

But the so-called Dutch auction could change that price, particularly if most of the bids fall below the minimum $108 target. The auction is expected to be wrapped up sometime next week, the company said on Thursday.

But securities attorneys said Playboy's interview with Google co-founders Larry Page and Sergey Brin could change the company's IPO timetable.

In the seven-page article, Page and Brin discuss the company's rapid growth and even brag about how Google's search engine has helped save people's lives.

The interview, contained in a Playboy issue delivered to some subscribers on Thursday, threatens to delay Google's initial public offering because securities regulations restrict what executives can say while preparing to sell stock for the first time. Google needs the Securities and Exchange Commission to approve its IPO registration statement before it can complete the stock sale -- a process the interview complicates, predicted Michael Zuppone, a former SEC attorney.

'I don't want to rain on their parade, but I think this interview is going to cause regulatory concern. There could be consequences,' said Zuppone, now with Paul, Hastings, Janofsky & Walker in New York.

Securities attorney David Walek of Ropes & Gray agreed that the interview would be a serious problem for almost any company preparing an IPO. But he said Google may be an exception to the usual rule because of the widespread publicity swamping the company since its IPO filing in late April.

'There already has been so much written about this company that the SEC may conclude that this doesn't really change the mix that much,' Walek said.

SEC spokesman John Nester and Google spokeswoman Cindy McCaffrey declined to comment on Thursday.

The SEC sometimes imposes a 'cooling off' period when a company involved in an IPO releases any information that deviates from its IPO registration statement. The SEC is especially sensitive to promotional remarks while a company is gearing up for an IPO, securities attorneys said.

Regulators cracked down on Salesforce.com in May when the company's CEO, Marc Benioff, cooperated with an article published in The New York Times on May 9. After the article appeared, the SEC forced the San Francisco-based company to delay its high-profile IPO. Salesforce.com completed its IPO six weeks after the article appeared.

Playboy spokeswoman Theresa Hennessey said the magazine conducted the interview with Page and Brin on April 22 -- a week before Google filed its registration statement. None of Google's top executives have granted interviews since the company's IPO filing. Securities attorneys contacted on Thursday said they doubted the timing of the interview would matter to the SEC because Page and Brin knew then that an IPO filing was imminent.

'The SEC draws a distinction between what a company can control and what they can't control, and this is something they could have controlled,' said Bob Clarkson of Jones Day in Menlo Park. Google's decision to proceed with the IPO auction may be an indication that the company is confident the Playboy interview won't result in a delay, Walek said.

But Clarkson disagreed. 'Beginning the auction still doesn't preclude the SEC from stepping in and slowing down the offering.' The uncertainty raised by the Playboy interview is just the latest in a string of recent developments that have clouded Google's long-awaited IPO.

The company has been stung by a backlash against the high target price sought in its IPO, a legal settlement that will result in a third-quarter loss and a disclosure that management may have broken securities laws in 18 states by neglecting to register stock previously distributed to its employees.

To make matters worse, investors have been souring on tech stocks, causing some analysts to wonder whether Google would be better off postponing its IPO.

No one stands to lose more from an IPO delay than Page, 31, and Brin, 30.

The former Stanford University graduate students plan to sell a small portion of their Google stakes in the IPO -- divestitures expected to provide $100 million windfalls for each. If Google realizes its goal of pricing the IPO at a minimum of $108 per share, Page and Brin would each be worth at least $4 billion on paper.

In the Playboy interview, both Page and Brin cover mostly familiar ground about Google's history, the company's unconventional business approach and their aspirations to make the world a better place.

They also express tremendous pride about Google's accomplishments during the company's nearly six-year history.

'Google is a useful tool in people's lives,' Brin told Playboy. 'There are extreme cases, we're told, when Google has saved people's lives.'

Brin said, 'Someone wrote that he was having chest pains and wasn't sure of the cause. He did a Google search, decided he was having a heart attack and called the hospital. He survived and wrote us.'

At other points, Brin boasts that 'ads on Google work' and describes the search engine as a 'powerful tool.' Page touts Google as a significant improvement over many of the Internet businesses that launched IPOs during the dot-com boom of the late 1990s.

'We have more than 150,000 advertisers and a lot of salespeople,' he said. 'Millions of people use Google. It's a completely different thing.'