Google float hit by share sale hitch

Google's hotly anticipated public share offering has hit an unexpected bump in the road after the company disclosed it had failed to declare the sale of more than 23 million shares to employees and consultants, in violation of US securities laws.

Google's hotly anticipated public share offering has hit an unexpected bump in the road after the company disclosed it had failed to declare the sale of more than 23 million shares to employees and consultants, in violation of US securities laws.

The popular Silicon Valley-based search engine disclosed the lapse in its latest filing with the Securities and Exchange Commission and offered to buy the shares back for about $1 each - about 100 times less than the price Google hopes its shares will fetch when they hit the open market.

The disclosure did not immediately appear to pose any serious problems for Google and was not expected to derail its IPO, which could take place next week. Many analysts expressed concern, however, that a company with a reputation for probity and scrupulousness could have made such a glaring mistake and wondered what it might portend for future accounting and disclosure practices. Stephen Diamond, a law professor at Santa Clara university, told a US newspaper: "From a corporate-governance level, it would be nice to know what led Google to issue millions of shares without following the SEC's rules."

Google said it sold the shares to 1,105 current and former employees, as well as consultants, between September 2001 and June of this year. The buyback offer expires in September - a date that seemed designed to encourage the shareholders to keep their assets and, if they want, sell them on the open market once the IPO is complete.

Should the buyback occur, it will cost Google only $25.9m, small change for a company with $549m in cash on hand.

Google has chosen an unorthodox Dutch auction arrangement for its share sale, in which it hopes to raise more than $3bn, offering 24.6 million shares. If its sale price range of $108-$135 per share is realised, the company will have a market capitalisation as high as $36bn. The timing of the IPO will depend on the logistical demands.