Google IPO and decentralising the Capital Market
- Now if Google REALLY wanted to be radical they might think about the
1/ Create Google LLC with two Members:
(a) Google Inc - the existing "capital user";
(b) Google Investment Partnership ("GIP") - the Investor/"Capital
provider" which consists of a loose consortium of every individual
who wishes to invest in Google.
2/ The Investors receive a "Capital Rental" in respect of their
investment: this consists of a PROPORTIONAL share/partnership
interest in gross Google revenues (not the earnings net of corporate
management excesses we are used to in the current Capital paradigm).
How does this work?
Simple: let's say Google is raising $3bn to enable the VC's to exit
and pay for pizza all round.
GIP is therefore divided into (say)1 billion "shares"/partnership
interests, but these are not "shares" as we know them, Jim.
Each "share" carries a right to one billionth of an agreed proportion
of Google GROSS revenues.
Say these come in this year at $1.5bn as some forecast: a reasonable
INITIAL rate of return of (say) 5% on the $3bn investment would then
give Investors an initial "Capital Rental" of $150m or 10% of Google
ie each "share" carries one ten billionth of Google revenues.
What happens in future years? If Google Inc has a good year, then so
do the Investors, because they are both sharing the same GROSS
And of course Google can simply buy back these "shares" in their
future revenues at the market price at any time.....
The outcome is what I call "Temporary Equity" and is less risky than
current "Equity", but potentially a lot more remunerative than Debt.
It's a "Capital Partnership" already in use in the UK (most notably
in a £350m deal in late 2002) and an idea now spreading as people
over here catch on.
Now where will a periodic auction market for these "shares" take
place? Where else other than the Google website? Such "Self-Listing"
is an inevitable consequence of the decentralisation of capital
markets.Who needs NYSE or NASDAQ anyway?
A good start, Messrs Brin and Page, but you haven't broken the mould
just yet - the best thing about Google for me is its neutrality -
a "Capital Partnership" is a simple way of maintaining this essential
quality and distinguishing it from any efforts by Microsoft and Yahoo
aimed at monetising searches to our detriment as search users.
Partnerships Consulting LLP
- This actually sounds quite interesting and comprehensible (almost). So,
correct me if I'm wrong, in your scenario, the "investors" are more
like money lenders, yes?
You said "rate of return of (say) 5%". the Who decides what this
payback rate is?
Do Brin and Page still have ultimate control over this decision?
What power does GIP have over Google Inc?
On May 03, 2004, at 11:56 am, firstname.lastname@example.org wrote:
> Subject: Google IPO and decentralising the Capital Market
> Now if Google REALLY wanted to be radical they might think about the
> 1/ Create Google LLC with two Members:
> (a) Google Inc - the existing "capital user";
> (b) Google Investment Partnership ("GIP") - the Investor/"Capital
> provider" which consists of a loose consortium of every individual
> who wishes to invest in Google...
- --- In email@example.com, Daniel Harris <yahoo@k...>
> This actually sounds quite interesting and comprehensible(almost). So,correct me if I'm wrong, in your scenario,
>the "investors" are more like money lenders, yes?Yes - but unlike money lenders they don't get a fixed rate of
return, cos they share the upside and downside with Google Inc.
Also Investors don't care what Google Inc does with their share of
the revenues: however both Investors and Google Inc share a common
interest in maximising the value generated by Google.
A Capital Partnership generates "Open Capital" (www.opencapital.net)
a hybrid of debt and the pretty inequitable shareholder value
variety of "equity" we are all too familiar with: less risky
than "Equity": more potentialy remunerative than Debt. Some call
it "Temporary Equity".....
> You said "rate of return of (say) 5%". the Who decides what thisIt's bid and offer: Brin and Page have to think how much in Revenues
> payback rate is?
they give away against the Capital raised: Investors have to look at
the expected rate of return versus the Risk.
Note that the market price of this new asset class (because that is
what this "Temporary Equity" is) is simply the present discounted
value of future revenue flow. The more uncertain the revenues, the
riskier the investment and the bigger the proportion of revenues
> Do Brin and Page still have ultimate control over this decision?As they control the company, I guess they do: but I guess the VC's
wanting an exit plus allowing staff to monetise some of their sweat
equity is driving the decision to IPO.
> What power does GIP have over Google Inc?None whatever. The beauty of a "Capital Partnership" is that the
User/Occupier of the Capital or Capital asset respectively does not
care who the Investors are and vice versa - since both share common
aims in maximising revenues.
Hope that explains things