Google making noise during IPO Quiet Time

Andy Beal points to David Vise's Washington Post article that says the company is bucking tradition by making plenty of noise since filing to go public: "Since filing papers in late April saying it wants to sell $2.7 billion in stock to the public, the California-based search engine giant has not been shy (Googleblog) about rolling out new products (gmail) or articulating its view on software."

This is especially interesting given the fact that Salesforce.com has delayed its initial public offering after hearing from the Securities and Exchange Commission that the company's chief executive violated the S.E.C.-imposed "quiet" period.

Companies normally stay quiet during this period because any material statements or projections made by the company, whether in the prospectus or made orally, if false or misleading to the reasonable investor can be actionable. See Anti-Fraud provisions of S. 12(a)(2) and S. 10b-5. "A statement is material if there is a 'substantial likelihood that, under all circumstances, the omitted fact would have assumed actual significance in the deliberations of the reasonable shareholder.' TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 449 (1976); Basic Inc. v. Levinson, 485 U.S. 224, 230-32 (1988) (expressly adopting TSC standard in the Rule 10b-5 context).” Stephen J. Schulte, IPO Road ShowsToday: A Primer for the Practitioner, April 2000 at 9 n.15.; see also Feit v Leasco Data Processing Equipment Corp., 332 F Supp 544, CCH Fed Secur L Rep P 93163 (E.D.N.Y. 1971) (fact is "material" in registration statement within meaning of 15 USCS § 77k(a) whenever rational connection exists between its disclosure and viable alternative course of action by any appreciable number of investors).

The problem is that oral statements, where the speaker makes them without genuine belief in their validity, without a reasonable basis, is unaware of undisclosed facts which undermine their accuracy or the statements create a situation where the prospectus now contains a material omission which needs to be remedied, are also actionable. See In re Apple Computer Sec. Litig., 886 F. 2d 1109 (9th Cir. 1989), cert. denied, 496 U.S. 943 (1990) August 12 update: The IPO is going ahead on Friday the 13th despite the fact that Playboy has just released its September issue complete with an interview with Brin and Page. See also: Excerpts from Google co-founders' Playboy interview and Full Text of The Interview.