America's No. 1 financial conglomerate

Chapter 671 Issue Price

Hamilton had no interest in Ernst's love-hate relationship with Wall Street.

His current task is to successfully push Google to go public.

"What about the issue price?"

Ernst has not yet set a price for Google's IPO, but with less than a week until the listing, it should be decided by now.

"How about $385?" Ernst said slowly.

Hamilton remained silent for almost a minute before his pupils suddenly contracted and he exclaimed in surprise, "Are you sure?"

"With a total outstanding share capital of one billion shares and an initial public offering of three hundred million shares, totaling 13 billion shares, and an offering price of $385 per share, Google's market capitalization would exceed $5000 billion. Isn't that too high?"

This market capitalization not only broke the record for the highest valuation of a listed technology company, but also directly challenged Microsoft, the world's most valuable company.

Even though there has been a persistent claim that Google will overtake Microsoft to become the world's most valuable company.

But talk is talk; until it's reflected in the stock price, it's all just talk.

Ernst was startled by his sudden outburst; it turned out he'd been calculating prices all this time. Ernst nodded slightly and said firmly, "Google's financial statements support this market capitalization."

In 1998, Microsoft's financial report showed revenue exceeding $150 billion, gross profit reaching $120 billion, and net profit at $63 billion. Now, Microsoft's market capitalization exceeds $5200 billion.

Google's 1998 financial report showed revenue exceeding $147 billion, gross profit reaching an astonishing $128 billion, and net profit of $38.6 billion.

In comparison, Google's financial reports are indeed not as good as Microsoft's.

However, if you break it down and examine it closely, Google's financial statements offer much more to the imagination than Microsoft's.

Microsoft relies on operating systems and office software for 90% of its revenue, making its business structure relatively simple. Its internet business currently has almost no chance of challenging Google, and its game console business is still in its infancy, with a clear growth ceiling.

Google, on the other hand, presents a diversified business structure, with GG business accounting for 42% of total revenue, value-added services accounting for 38%, and the remainder coming from diversified businesses such as software sales and technology licensing.

More importantly, Google's gross profit margin is as high as 87%, far exceeding Microsoft's 80%, which is enough to prove Google's advantage in cost control and profitability.

The reason for the large difference in net profit is mainly due to Google's research and development expenditures.

Microsoft's R&D spending is already quite large, accounting for about 15% of its total revenue.

Google's figure is even more extreme, reaching 22%.

In addition, there are Google's strategic investments. The first is that last year, Google Video signed exclusive online film and television licensing agreements with several film and television giants such as Disney and Warner Bros., with the initial copyright investment alone reaching as high as $23 billion. This is a necessary cost for building a streaming media ecosystem.

The second is the GG subsidy program for local SMEs, which has accumulated more than $28 billion in subsidies since last year.

Since flash sales boosted the food delivery industry, Google has noticed a surge in Google clicks on local retail and food delivery-related listings.

Being a guy at a big company naturally has its advantages.

But these local small and medium-sized enterprises (SMEs) represent a vast untapped market.

In order to reach these local Google users and let them know the benefits that Google Google can bring, Google launched Google subsidies for these small and medium-sized enterprises, especially small retail Google subsidies, which were almost a loss-making effort to gain publicity.

Currently, more than 12 local SMEs have joined the Google GG platform. If 20% of them can be converted into long-term customers, Google's long-term benefits will gradually become apparent.

Besides these two items, there is another major expense: Google's data centers.

The first phase of four large data centers has been completed, and last August, Google launched the second phase of its data center plan.

With a total investment of over US$110 billion, 16 large data centers will be built around the world.

If it weren't for these three major expenditures, Google's financial report would completely outperform Microsoft's.

"Moreover, we have a lot of positive news on hand, so there's no reason to set a low price. I think it's already a low price." At this point, Ernst paused and looked at Hamilton. "When the auction is held, tell the underwriters that Google will issue no less than $300 billion worth of common stock on Nasdaq again in six months, and the underwriting fee rate must be kept below 1%."

"Another round of financing?" Hamilton hadn't expected Ernst to get Google to raise funds again within six months.

"Our cash flow is healthy enough to buy three clusters of Silicon Valley startups, so why would we need to issue more shares?"

Ernst looked up and said, "What we need is not money, but capital ammunition."

"Google's GG revenue is the bulk of its business, but in the realm of digital GG, we are humble followers."

"Bleclick launched the artGG server in 1997, enabling cross-site Google delivery, targeting, and monitoring."

"afrce has also established a central GG management and transmission mechanism, which can provide cross-domain GG deployment and effect evaluation."

"enae's technology for targeted advertising based on user browsing data is in no way inferior to Google's, and it's the technology we need."

"For a company with a market value of hundreds of billions of dollars, what they want is no longer short-term profit gains, but industry monopoly ten years from now."

"Besides its digital GG business, Google has many other technology companies that it can acquire and integrate."

"And then there's our research and development work, which is a bottomless pit."

"The internet still has a huge bubble. While the market is doing well, Google must increase its cash flow and lock in long-term, low-cost funds to avoid being forced to raise funds at high prices and sell assets at low prices during a crisis." "The most important thing is to hedge against potential risks and build a safety cushion."

Hamilton understands this point; no one can guarantee that Google won't become the next Microsoft and face an antitrust investigation.

Financing is not just about raising money; it's also about political and relationship capital, maintaining the status of the capital market, and binding the interests of Wall Street.

By dispersing shareholding, more institutions can be bound together, forming a community of shared interests.

Investment banks and institutions will give priority to supporting mergers and acquisitions, refinancing, and crisis relief in the future.

"If possible, I hope Google can raise at least three rounds of funding within the next year, accumulating at least $1000 billion in ammunition."

"Do you think there might be changes in Nasdaq in a year?" Hamilton exclaimed.

"I'm not sure," Ernst shook his head. "But investments need returns, just like buying government bonds and buying gold."

"When the market stabilizes and the economy recovers, capital will buy government bonds, not gold."

"Because government bonds offer returns, while gold does not."

"With the global economic recovery, there are too many industries that can provide stable returns for investment. Who would still put all their money into an internet company that has no performance support and no returns?"