Google IPO: Company illegally issued shares

Mountain View (CA) - Up to 23 million shares of stock and stock options may have already been given to employees and consultants, injecting an unexpected legal risk into the highly anticipated IPO.

Google disclosed Wednesday in a prospectus offering to buy back the affected shares and outstanding stock options for a total of $25.9 million, including interest payments. As of June 30, Google has $549 million in cash, so this should be no problem.

From September 2001 to June 2004, the company says it neglected to register 23.2 million shares of common stock and 5.6 million outstanding stock options with securities regulators. The oversights might have broken federal and state laws, according to Wednesday’s filing. The affected common stock is owned by 1105 current and former employees, as well as company consultants.

It’s unclear whether Wednesday’s twist will affect the timing of Google’s initial public offering - a deal expected to raise up to $3.3 billion, with roughly half of the money flowing into the company’s bank accounts. The rest of the money will be split up among Google’s top executives and early investors who plan to sell stock in an IPO carrying a target price of $108 to $135 per share.

Google is currently letting prospective bidders register for an upcoming auction of 24.6 million IPO shares at www.ipo.google.com .

Google’s shares could begin trading on the Nasdaq Stock Market as early as next week.