Company may have violated law by issuing millions of unregistered shares and options to employees
By Scarlet Pruitt, IDG News Service August 05, 2004
Google Inc. may have violated federal and state securities laws by issuing millions of unregistered common shares and stock options to its employees and consultants, the company said in a regulatory filing Wednesday. The revelation comes as the search giant prepares to launch one of the most anticipated initial public offerings (IPO) in recent history, valued at billions of dollars, and casting a veil of uncertainty over the future of the offering.
In a document filed with the U.S. Securities and Exchange Commission (SEC), the company offered to repurchase over 23.2 million shares of common stock and some 5.6 million in stock options that it meted out to present and former employees and consultants because the issuances may have violated the Securities Act of 1933, as well as certain state security laws.
Google said that the share issuances in question were not registered under certain federal and state securities laws, nor did the company seek to exempt the securities from the registration requirements. Therefore, it is issuing a "rescission offer" to buy back the shares and options, issued between September 2001 and June 2004. It is a move that could cost the company approximately $25.9 million should it be accepted by the SEC.
"The rescission offer is intended to address these federal and state securities laws compliance issues by allowing the holders of the options and shares covered by the rescission offer to rescind the underlying securities transaction and sell those securities back to us," the filing says.
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http://www.infoworld.com/article/04/08/05/HNgoogleviolations_1.html