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Business

European Investors Shut Out of Google IPO

As pundits discuss popular Internet search engine Google's bullish expected share price, European investors have been excluded from the IPO that was rumored to be open to public bidding on the Web.

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Foreign investors will have to jump many hurdles to buy Google shares

Google's unorthodox initial public offering is expected to take off within weeks. Investors will be able to register to bid for shares on a Website launched by the company Friday. Non-US citizens aren't exactly barred from bidding, but they must go through a long and time-consuming process to take part. They're unlikely to complete the formalities necessary to register before Google floats its shares.

European -- or any foreign -- investors must either have or open a US bank account with one of the consortium of financial institutes involved in the IPO to participate. But even then, the underwriters may prevent their bank clients from taking part in the bid if they do not fulfill their suitability requirements, which may include having hundreds of thousands of dollars on their accounts.

Furthermore, the IPO site starts out by saying, only US persons may take part in the IPO. Thus, the potential investors must obtain a US tax number, which requires submitting a completed form, a notarized copy of one's passport and a letter from one's bank explaining that the tax number application is necessary to participate in the Google IPO. The US tax service will then process the request and issue a tax number in four to six weeks, according to the office's Website.

Only then may determined investors who haven't been scared away by Google's high expectations for individual share prices ($108 - $135 / €89.50 - €111) apply for a bidder identification number from the Google IPO Website. The prices would put the six-year old company's value at $29 billion to $36 billion, not far from its larger competitor Yahoo, which is valued at $37 billion. But the prices aren't set in stone and will instead reflect auction bids.

If the online auction is successful in allowing members of the public, alongside traditional investors from mutual funds and investment banks, to participate in the IPO it could change the way public offerings are held.

"Potentially this IPO is incredibly important," Laurie Hodrick, a professor at Columbia Business School, told the Associated Press. "It's a very sizable IPO, and so different from how large IPOs are done. If it is deemed a success, it really opens a new avenue for issuing equity."

However, by the time foreign investors complete the entire process necessary to bid, it may already be too late. The floating of the company's 24.6 million shares is expected to take place over around two weeks after the US Securities and Exchange Commission authorizes the IPO.

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