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updated 7/26/2004 7:47:02 AM ET 2004-07-26T11:47:02

Google is set as early as today to publish an estimated price range for its shares, triggering the countdown to the most eagerly awaited initial public offering in years.

The eventual price, however, will be set in an auction that may drive it much higher. This has caused concern on Wall Street that Google's stock may collapse once trading begins.

The question of how to price Google's shares has turned into a battle of wills between Silicon Valley and Wall Street and led to bitter accusations from both sides.

Banks underwriting the deal have been guaranteed fees of only about 1.75 percent for their work, far lower than normal, according to two people familiar with the arrangements. The low fees have added to the tensions between the two sides. Google has also set aside another 1 percent in fees to be handed out on a discretionary basis.

Backers of the Internet search engine claim that Wall Street priced the stocks of Internet companies too cheaply during the dot-com boom of the 1990s, depriving Silicon Valley of some of the gains from selling the shares and handing windfall profits to favored investors.

Google's founders, Sergey Brin and Larry Page, along with its powerful venture capital backers, John Doerr of Kleiner Perkins and Mike Moritz of Sequoia Capital, have picked an auction mechanism to ensure they get the highest possible price.

But some on Wall Street argue that Google is being naïve. According to this view, many private investors are likely to bid high during the auction simply to ensure they receive shares, pushing the price to an unsustainable level.

Although Google has the right to set the price below the auction level, the company's founders and at least one of its VC bankers — Mr. Mortiz at Sequoia — are adamant for now that it will not use this power, according to one person familiar with the plans for the stock sale.

Nor does the company plan to exercise its right to sell much more than $2.7 billion of stock it has indicated, according to this person. Releasing a far bigger block of shares could be used to balance supply and demand and moderate the auction price.

Wall Street estimates of Google's value have tended to be in the $20-30 billion range. However, with demand for the shares expected to be intense, particularly from private investors hoping for an early profit, some estimates have put the company's initial stock market value at $40 billion or more.

Google's own price estimate may serve to discourage some investors from over-bidding in the auction. Also, Internet stocks have cooled considerably since the end of last month, further reducing the risk of an instant bubble in Google's shares.

Copyright The Financial Times Ltd. All rights reserved.

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