Securities law requires private companies that exceed a certain level of stock distribution to file quarterly financial data with federal regulators. If the law is applied to the popular search engine, Google executives would have to disclose the company's closely guarded financial information, which could ultimately play into the decision on whether or when to take the company public.
A private company must report its finances once it has more than 500 common shareholders -- or stock-option holders -- and $10m (£5.73m) in assets, according to section XII(g) of the Securities and Exchange Act of 1934. That means a private company must file forms with the Securities and Exchange Commission (SEC) each quarter that disclose operating expenses, profits, partnerships, shareholders and many other details -- a laborious process that can cost as much as $2m annually.
In Google's case, the benchmarks may be meaningful now because the company has grown tremendously in the last year, with expected annual profits in the tens of millions of dollars and more than 1,000 employees. At least 650 of those employees have options to buy shares, sources say, while about one-third of the staff works on contract and does not receive shares.
SEC standards require that qualifying private companies to report within four months of the end of their calendar year, which in Google's case is April. Financial analysts expect the company to go public in the spring of 2004.
Google cofounder Sergey Brin has said in the past that the company is in no rush to sell shares to the public. Google representatives declined to comment for this story.
A typically tight-lipped company, Google is unlikely to disclose financial details without the benefits of raising money at the same time, industry watchers say, but the rule is hardly the biggest factor weighing on its decision to go public. More influential factors will probably include demand from investors and the prospect of raising hundreds of millions of dollars to appease venture capitalists and employees, potentially revive the tech IPO market, and make acquisitions to fend off rivals.
