Google failed yesterday to get the green light from federal regulators to proceed with its long-awaited initial stock sale.
The company will have to delay the IPO, which was widely expected to happen yesterday, until it gets final approval from the Securities and Exchange Commission.
Google had asked the agency to declare its registration statement effective by 4 p.m. yesterday, which would have allowed the company to sell shares to the public.
The company had indicated that it would close the auction-style sale and begin notifying the winning bidders within an hour of gaining SEC approval.
As of the close of business yesterday, the agency had made no decision on the company’s request, said SEC spokesman John Heine.
He declined to say why the agency didn’t take action yesterday.
A Google spokeswoman declined to comment.
The delay caps a series of regulatory missteps for the company, which appears to have violated a couple of securities rules en route to becoming publicly traded.
On Monday, Google revealed that the SEC had started an informal inquiry into its offer to buy back unregistered shares.
In July, the company disclosed that it had issued more than 23 million shares and 5.6 million stock options illegally to employees and consultants, which also triggered an investigation by California regulators. Legal experts said the SEC could declare the registration statement effective – allowing the sale to proceed – while conducting the inquiry.
“What the SEC often will do, particularly in this context, is make Google say that declaring the registration effective does not mean that there’s any signal from the SEC one way or another on the inquiry,” said Kenneth Henderson, a partner in the corporate finance practice at the law firm of Bryan Cave.
Earlier this month, the company was forced to acknowledge that its 30-something founders might have violated the so-called “quiet period” surrounding the IPO by giving an interview to Playboy magazine.
The SEC chose not to delay the share sale over that issue.
“It hasn’t been the smoothest offering in the world,” Henderson said.
With reporting by Jenny Anderson