In August 2004, Google went public at a price of $85 per share. One year later, its stock...

In August 2004, Google went public at a price of $85 per share. One year later, its stock price reached $285, as the firm’s earnings consistently exceeded analysts’ consensus forecasts. At that time, its forward P/E ratio was 37.5 and its ratio book-to-market equity was 0.052. In August 2005, Google announced that it planned to issue 14,159,265 new shares in a seasoned equity offering. At the price prevailing at the time, the amount of the new offering would have been about $4 billion. In its SEC filing, Google managers stated that the proceeds for the offering were for general corporate purposes but the firm had no current agreements or commitments concerning material acquisitions. Analysts reacted with a series of speculative comments about what Google’s managers might be planning to do with the proceeds of the new issue. Discuss Google’s seasoned equity offering in the context of the ideas described in the chapter. In addition, comment on the choice of the precise number Google managers selected in respect to the number of shares in its offering.