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1. In 1998, Larry Page and Sergey Brin formed a partnership to work on a search engine called BackRub. This allowed them to share profits and losses from the business. 2. In 2004, Google became a public limited company, offering over 19 million shares at $85 per share. As a public company, Google gained access to capital by selling stock on the public market. 3. Going public provided advantages like raising capital for growth but also disadvantages such as increased regulatory requirements and transparency as well as the potential for losing control. Overall, the IPO helped Google expand through access to new funds.

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Kressida Banh
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43 views

Homework

1. In 1998, Larry Page and Sergey Brin formed a partnership to work on a search engine called BackRub. This allowed them to share profits and losses from the business. 2. In 2004, Google became a public limited company, offering over 19 million shares at $85 per share. As a public company, Google gained access to capital by selling stock on the public market. 3. Going public provided advantages like raising capital for growth but also disadvantages such as increased regulatory requirements and transparency as well as the potential for losing control. Overall, the IPO helped Google expand through access to new funds.

Uploaded by

Kressida Banh
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Homework: google case

1. „The following year they formed a partnership and began collaborating on a


partnership:
search engine called BackRub.”
a. A partnership is a formal arrangement by two or more parties to manage and operate a business and
share its profits.

b. In a general partnership company, all members share both profits and liabilities.
c. Professionals like doctors and lawyers often form a limited liability partnership.
d. There may be tax benefits to a partnership compared to a corporation.
2. Outline two benefits to Larry Page and Sergey Brin of starting Google as a partnership
a. business losses shared between partners
b. Shared decision-making (idea) like the name google
3. Examine the difficulties the partners would have encountered when they set up Google.
a. different management syles
b. personal habits
c. financial problems and equity
d. setting bloundaries
e. commitment levels
4. Explain the term ‘public limited company’ :
„In the same year, Google became a public limited company offering for sale 19,605,052
shares at an opening price of $85 a share.”
a. A public limited company is a business that is managed by directors and owned by shareholders
b. can offer shares to the public
c. must meet due to being public, including further admin regarding tax, and making their financial
reports public so would-be shareholders have all the information they need before investing
d. A public limited company is also listed on the stock market and essentially needs to be more open and
public about its details than a private company.
5. Discuss the advantages and disadvantages to Google following its conversion to a plc in 2004
a. advantages:
i. Raising capital through public issue of shares
1. ability to raise share capital, particularly where the company is listed on a
recognised exchange.
ii. Widening the shareholder base and spreading risk
1. opportunity to spread the risk of company ownership among a large number
of shareholders
iii. Other finance opportunities
1. Banks and other financial institutions may be more willing to extend finance to a
public limited company
iv. Growth and expansion opportunities
1. the value of being able to raise finance is in how it can be employed to serve the
business. By having more finance potentially more readily available and on better
terms than a private company, the public limited company ican be in an advantaged
position to:

a. Pursue new projects, new products or new markets


b. Make capital expenditure to support and enhance the business
c. Make acquisitions (whether in cash or by offering shares to the
shareholders of the target business)
d. Fund research and development
e. Pay off existing debt (or replace existing debt with new debt on better
terms)
f. Grow organically
v. Transferability of shares
1. The shares of a public limited company are more easily transferable than those in
the private equivalent, meaning shareholders benefit from liquidity.
vi. Exit Strategy
1. Going public can enhance the options for the founders to exit the business at some
point in the future, if they wish to do so. Both higher transferability of shares and
the increased visibility of the business and its performance may increase the
chances of bid interest from potential suitors.
b. disad
i. More regulatory requirements fe A trading certificate must be obtained from Companies
House before the company can trade (there is no such requirement for a private company)
ii. Higher levels of transparency required
Limited companies, whether public or private, have more of their details in the public
domain, available via Companies House, than other business types. But the required level of
transparency is much higher for public companies.
iii. More vulnerable to takeovers
At worst, a company can become vulnerable to a hostile takeover if a majority of
shareholders agree to a bid. With shares being freely transferable, a potential bidder can
build up a shareholding in advance of launching a bid attempt.
iv. Initial financial commitment is higher

v. Ownership and control issues


With a public limited company, it’s much harder to control who is a shareholder of the
company, and who the directors are ultimately accountable to. There is therefore a possibility
that the original owners or directors can lose control of the direction of the company, face
disputes or just spend a lot more time managing shareholder expectations.
6. general:
 major challenges of going public:
o investor appetite
 Not every company has masses of followers who are chomping at the bit to own stock.
Boards should help their company assess whether or not there will be enough interest in its
IPO to make the shift worthwhile.
o distraction caused by the ipo process
 f leaders in the company are focused on the IPO process, they may miss opportunities to
enhance their product or overlook an up and coming competitor.
o financial reporting
 Taking a company public also makes much of that company’s information and data public.
 public reporting can bring on scrutiny from shareholders, which sometimes results in
shareholder lawsuits.
o cost
 transition to an IPO is not a cheap one
 Additionally, a poorly timed IPO can end up being extremely detrimental to the
company’s financial growth and stability. (ipo= international public offering)
 benefits
o the company can raise a lot of cash and FAST. As FindLaw writes, “New capital is raised without the
associated risks, restrictions, and costs of debt or the constraints of venture capitalists.”

o This cash influx helps lower the company’s debt to income ratio and also provides more funds for things like
advertising, better compensation packages, and development of new products.
o Public companies often have an easier time attracting top tier talent
o Going public provides a company with many opportunities for publicity and media coverage

o Publicly traded companies often have more influence when it comes to negotiating with vendors.

KEY TAKEAWAYS
 In order to become an IPO, a company must be able to pay for the generation of financial reporting
documents, audit fees, investor relations departments, and accounting oversight committees.
 IPOs often generate publicity by making their products known to a wider potential swath of customers,
but taking a company public is a huge risk.
 Smaller businesses may find it difficult to afford the time and money it takes to become an IPO.
 Privately held companies have more autonomy than public ones.

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