Holman Jenkins’ WSJ ($) Business World column today examines of the blather that the owners of Google are trotting out to the public to promote their upcoming intial public offering. The entire column places the context of the Google IPO in the proper context of investing in such speculative endeavors, and the following are highlights of a few of Mr. Jenkins’ insightful observations:

Google’s founders don’t want to go public, their company doesn’t need the money, but they’re going public anyway. Why? To create a “liquidity event,” an opportunity for the founders, employees and venture investors to cash out some of the wealth they’ve been working for.
Being a sucker in somebody else’s liquidity event, of course, is not the sort of invitation investors normally leap at. Yet that’s the role IPO investors frequently volunteer themselves to play. In turn, Wall Street underwriters have traditionally seen their job as setting the IPO price low enough so those who ante up will be rewarded with first-day profits when the stock trades up — not just as a bribe, but as a token of good faith.
Yes, this tradition got out of hand in the Internet bubble, when new companies tripled or quadrupled in the first day. Bankers can hardly be faulted for pricing an IPO at a level reasonably related to a company’s earnings and prospects. Blame investors: They’re the ones who behaved strangely. Nor does Google solve this problem with its much-touted auction plan, which on closer inspection is somewhat faux. The company will indeed solicit bids over the Internet but reserves the right to set a final price by the visible hand of its owners and bankers. How come? Google and its bankers fear big institutional money will stay away unless assured of a first-day pop.

And what about that dual stock provision that gives Google’s current owners’ IPO shares ten times the voting power of an ordinary share?

As the prospectus frankly states, the goal is to entrench insiders in control of the company. Cofounder Larry Page’s celebrated Buffett-like letter is devoted mainly to explaining why this favor to himself is really in the interest of you, the potential shareholder:
“Because we’ll be able to focus on the long term without worrying about short-term pressure from Wall Street.” Moralizing about the long term versus the presumably disreputable and unvirtuous short term is mostly an evasion of real issues. The stock market is perfectly capable of taking a long view — witness the share prices of firms that Google hopes to keep company with, such as Yahoo and Amazon, which enjoy huge valuations compared to current earnings precisely because the market is betting on long-term potential.

“We provide many unusual benefits for our employees, including meals free of charge, doctors and washing machines. . . . Expect us to add benefits rather than pare them down over time.” The Googlers don’t mention the $800 heated toilet seats. Investors will have to judge whether such bennies are genuine productivity builders — or whether they count as “on-the-job consumption,” one of the “private benefits of control” that academic economists traditionally regard as the motive for voting-power lockups. To translate, that’s a nice way of saying insiders are living it up at shareholder’s expense.
“Dual class structures have not harmed the share price of companies.” If there’s no cost, then why don’t all companies avail themselves of the advantages Googlers see in the dual-share structure? In fact, a recent study by Harvard’s Paul Gompers and Joy Isshi and Wharton’s Andrew Metrick finds that such companies have reduced share valuations, and invest less in R&D and advertising. The authors conclude with the suspicion that a “misalignment of incentives leads dual-class firms to invest too little, leading to lower sales growth and valuations.”
We aim to “make the world a better place” and fulfill the company motto “don’t be evil.” Nobody fails to couch his or her motives in the higher good.

So, Mr. Jenkins urges investors who are assessing the Google IPO to look past the Google blather and focus on the owners’ motive in establishing a structure to retain control. However, Mr. Jenkins concludes with this salient point:

Google is owned by its owners, and they have every right to offer an interest to the public on whatever terms suit them. Fifteen years ago, a court tossed out an SEC attempt to ban dual-share issues, and quite properly, because there’s no compelling public interest to justify such interference in the property rights of company owners.

This Chronicle article reports that an independent law firm report on El Paso Corp‘s restatement of reserves earlier this year concludes that El Paso employees provided estimates of proven oil and gas reserves that “they knew or should have known were incorrect at the time they were reported.” Haynes and Boone‘s report also found El Paso employees from 1999 through 2003 “used aggressive and at times unsupportable methods” to book proven gas and oil reserves. In February, El Paso announced that it was reducing its proven reserves estimates by 1.82 trillion cubic feet of natural gas equivalent, representing 35 percent of its reserves as of Jan. 1, 2003. As a result, the Securities and Exchange Commission is commenced an investigation into the reserve revision, and the El Paso board hired Haynes and Boone to conduct an investigation and report on the matter. Earlier posts may be reviewed here regarding the El Paso reserve overstatement.