10 ms·

Google Plans To Split Shares 2-for-1

59 points by diogenescynic 15y ago

deleted 15y ago
[deleted]
Maven911 15y ago
I applaud them for making sure their own ownership of the company is not diluted, which is something I wish more founders were able to demand when they seek financing. On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right.
- davidw 15y ago
  > On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right. Well, it doesn't sound very good to me either, but luckily, a great many of their employees are extremely highly skilled individuals who can easily find work with other employers, should they not like the conditions.
  - dpark 15y ago
    Obviously employee mobility means an employer can do nothing wrong...
    - davidw 15y ago
      You're taking what I said and making a very black and white statement from it, which does nothing to further a good discussion of the subject. We're not talking about inhumane working conditions here, backbreaking labor, or an employer risking people's lives to make some extra bucks.
      - dpark 15y ago
        You're trying to make a false distinction between small immoralities and big immoralities. If Google is doing something immoral with respect to its employees, the fact that those employees can depart is irrelevant. Employee freedom does not neutralize employer immoralities, no matter what the size of those immoralities. Now, if you want to argue that what Google is doing is not immoral, then fair enough. I might even agree with you. But if we're taking it as a given that this action is wrong, then employee freedom doesn't make it right.
        davidw 15y ago
        Exposing someone to danger because you're too cheap to pay for proper safety is what I'd consider immoral. Not offering employees a certain class of shares is maybe lame, but not in the slightest what I consider immoral.
        dpark 15y ago
        That's reasonable.
- gregable 15y ago
  Assuming the price difference is small, an employee could sell their C share on the market and immediately buy an A share.
  - Drbble 15y ago
    But there is going to be very little selling in voting shares. People will prefer to sell their nonvoting shares first.
mason55 15y ago
The new shares will be non-voting and trade under a new symbol. Sergey and Larry will be required to sell voting shares when then sell.
bobz 15y ago
I think this makes a lot of sense. I believe the company is better tightly held, but this will allow them to do "start-upy" things like continuing to grant large equity bonuses without diluting the company control. I'm curious to see how much those voting rights will end up being worth. Assuming the two classes have the same payout "precedence" and receive the same dividends, any share price difference will be attributable to that voting right. (Probably not worth very much I would imagine, but someone could speculate that they will be more valuable in the future where a takeover was possible).
- dpark 15y ago
  > and receive the same dividends Yeah, they'll probably be the same there, at $0/year. I think there will be a slight skew toward the voting shares, but probably not a lot, since a vote at GOOG doesn't presently do anything.
  - jimmyvanhalen 15y ago
    On a related note: I really think analysts aren't looking at Google's income statement properly. I don't think Google is doing some kind of financial engineering, but their numbers doesn't look that great if you look closely: 1st Q 2011 GAAP net income $2.3B (adjusted to $1.8B after DOJ investigation, we'll use $2.3B anyway). 1st Q 2012 GAAP net income $2.89B ~$600 Million increase in GAAP net income. BUT WAIT 1st Q 2012 Traffic acquisition cost totaled $2.51 billion 1st Q 2011 Traffic acquisition cost totaled $2.04 billion ~$500 Million increase in TAC Google had to spend an additional $500 Million to earn an additional $600 Million net income. And it's the same thing if you compare other quarters YOY. The increase in TAC is almost equal to the amount of increase in net income. It's easier for Google to just withdraw money from it's own bank account and deposit it to another one and call it "net income". ;) jk
    - pessimist 15y ago
      Net income is after subtracting TAC. Revenues increased by $2.1b, so Google paid $500m to acquire $2.1b in revenue. Of the $1.6b in "real" revenue growth, they made around $600m in profits. In other words their profit margin is roughly 40%. Also if you're worried about such shenanigans, you can look at free-cash-flow, which was $3.1B for the quarter (astonishing for any non-oil/AAPL company).
sukuriant 15y ago
Wait, I'm a bit confused. Does this mean that I'm going to have X shares in GOOG and X shares in $newSymbol, and val(X)*2 = former stock price for GOOG? Or, will I retain X shares in GOOG and this new option will exist that will probably reduce the worth of my X shares. Obvious disclaimer: I have stock in GOOG
- dpark 15y ago
  If you have X shares of GOOG worth $Y, then after the split you'll have X shares of GOOG and X shares of GO2 (incidentally, this would be a cool ticker if they could get it). Your X shares of GOOG and X shares of GO2 would theoretically be worth $Y/2 each, but more likely, the value will be skewed slightly toward GOOG shares being higher. The actual price of your shares will be determined by the market, but you can expect that the total value of your stock should be fairly comparable after the split.
  - chocolatebunny 15y ago
    That sucks. Isn't GO2 considered harmful?
    - nthitz 15y ago
      Just when used in a 32-bit platform
      - deleted 15y ago
        [deleted]
  - sukuriant 15y ago
    Awesome. Thanks for the clarification :)
  - soupboy 15y ago
    Not sure if tickers can have numbers Edit: Doesn't seem to be an official rule, but the de facto standard does appear to be 2-3-4-5 character tickers.[1] [1] http://www.sec.gov/news/press/2007/2007-63.htm http://www.sec.gov/news/press/2007/2007-63.htm
mfringel 15y ago
So Google admits that their current common shares are nominally non-voting by creating additional common shares that are actually non-voting. As long as they don't pull a Yahoo, that should work out for them.
deleted 15y ago
[deleted]
- pessimist 15y ago
  No. According to David Drummond's postscript to http://investor.google.com/corporate/2012/founders-letter.html http://investor.google.com/corporate/2012/founders-letter.ht...: "Larry, Sergey and Eric have agreed to subject their shares to a Transfer Restriction Agreement. This agreement will maintain the same link between their voting and economic interests that exists today, even if they sell some of their non-voting Class C shares. If the founders or Eric wish to sell or transfer their non-voting Class C shares, a “stapling” provision in the agreement requires them to either sell an equal number of Class B shares, or convert an equal number of Class B shares into Class A shares. "
yay_cloud 15y ago
I think it's important for people to realize that this is NOT a dividend scenario. No GOOG investor will gain value because of this transaction -- in fact, each GOOG investor will lose value (voting power) because of this transaction.
- fletchowns 15y ago
  each GOOG investor will lose value (voting power) because of this transaction Even though these new shares are non-voting shares?
- dpark 15y ago
  Each owner of GOOG will have exactly as many votes after this "dividend". They will not be negatively affected. New employees and acquisitions will be negatively affected by receiving stock sans voting rights, though.

59 points by diogenescynic 15y ago

deleted 15y ago

[deleted]

I applaud them for making sure their own ownership of the company is not diluted, which is something I wish more founders were able to demand when they seek financing. On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right.

davidw 15y ago
> On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right. Well, it doesn't sound very good to me either, but luckily, a great many of their employees are extremely highly skilled individuals who can easily find work with other employers, should they not like the conditions.
- dpark 15y ago
  Obviously employee mobility means an employer can do nothing wrong...
  - davidw 15y ago
    You're taking what I said and making a very black and white statement from it, which does nothing to further a good discussion of the subject. We're not talking about inhumane working conditions here, backbreaking labor, or an employer risking people's lives to make some extra bucks.
    - dpark 15y ago
      You're trying to make a false distinction between small immoralities and big immoralities. If Google is doing something immoral with respect to its employees, the fact that those employees can depart is irrelevant. Employee freedom does not neutralize employer immoralities, no matter what the size of those immoralities. Now, if you want to argue that what Google is doing is not immoral, then fair enough. I might even agree with you. But if we're taking it as a given that this action is wrong, then employee freedom doesn't make it right.
      - davidw 15y ago
        Exposing someone to danger because you're too cheap to pay for proper safety is what I'd consider immoral. Not offering employees a certain class of shares is maybe lame, but not in the slightest what I consider immoral.
        dpark 15y ago
        That's reasonable.
gregable 15y ago
Assuming the price difference is small, an employee could sell their C share on the market and immediately buy an A share.
- Drbble 15y ago
  But there is going to be very little selling in voting shares. People will prefer to sell their nonvoting shares first.

mason55 15y ago

The new shares will be non-voting and trade under a new symbol. Sergey and Larry will be required to sell voting shares when then sell.

bobz 15y ago

I think this makes a lot of sense. I believe the company is better tightly held, but this will allow them to do "start-upy" things like continuing to grant large equity bonuses without diluting the company control. I'm curious to see how much those voting rights will end up being worth. Assuming the two classes have the same payout "precedence" and receive the same dividends, any share price difference will be attributable to that voting right. (Probably not worth very much I would imagine, but someone could speculate that they will be more valuable in the future where a takeover was possible).

dpark 15y ago
> and receive the same dividends Yeah, they'll probably be the same there, at $0/year. I think there will be a slight skew toward the voting shares, but probably not a lot, since a vote at GOOG doesn't presently do anything.
- jimmyvanhalen 15y ago
  On a related note: I really think analysts aren't looking at Google's income statement properly. I don't think Google is doing some kind of financial engineering, but their numbers doesn't look that great if you look closely: 1st Q 2011 GAAP net income $2.3B (adjusted to $1.8B after DOJ investigation, we'll use $2.3B anyway). 1st Q 2012 GAAP net income $2.89B ~$600 Million increase in GAAP net income. BUT WAIT 1st Q 2012 Traffic acquisition cost totaled $2.51 billion 1st Q 2011 Traffic acquisition cost totaled $2.04 billion ~$500 Million increase in TAC Google had to spend an additional $500 Million to earn an additional $600 Million net income. And it's the same thing if you compare other quarters YOY. The increase in TAC is almost equal to the amount of increase in net income. It's easier for Google to just withdraw money from it's own bank account and deposit it to another one and call it "net income". ;) jk
  - pessimist 15y ago
    Net income is after subtracting TAC. Revenues increased by $2.1b, so Google paid $500m to acquire $2.1b in revenue. Of the $1.6b in "real" revenue growth, they made around $600m in profits. In other words their profit margin is roughly 40%. Also if you're worried about such shenanigans, you can look at free-cash-flow, which was $3.1B for the quarter (astonishing for any non-oil/AAPL company).

sukuriant 15y ago

Wait, I'm a bit confused. Does this mean that I'm going to have X shares in GOOG and X shares in $newSymbol, and val(X)*2 = former stock price for GOOG? Or, will I retain X shares in GOOG and this new option will exist that will probably reduce the worth of my X shares. Obvious disclaimer: I have stock in GOOG

dpark 15y ago
If you have X shares of GOOG worth $Y, then after the split you'll have X shares of GOOG and X shares of GO2 (incidentally, this would be a cool ticker if they could get it). Your X shares of GOOG and X shares of GO2 would theoretically be worth $Y/2 each, but more likely, the value will be skewed slightly toward GOOG shares being higher. The actual price of your shares will be determined by the market, but you can expect that the total value of your stock should be fairly comparable after the split.
- chocolatebunny 15y ago
  That sucks. Isn't GO2 considered harmful?
  - nthitz 15y ago
    Just when used in a 32-bit platform
    - deleted 15y ago
      [deleted]
- sukuriant 15y ago
  Awesome. Thanks for the clarification :)
- soupboy 15y ago
  Not sure if tickers can have numbers Edit: Doesn't seem to be an official rule, but the de facto standard does appear to be 2-3-4-5 character tickers.[1] [1] http://www.sec.gov/news/press/2007/2007-63.htm http://www.sec.gov/news/press/2007/2007-63.htm

mfringel 15y ago

So Google admits that their current common shares are nominally non-voting by creating additional common shares that are actually non-voting. As long as they don't pull a Yahoo, that should work out for them.

deleted 15y ago

[deleted]

pessimist 15y ago
No. According to David Drummond's postscript to http://investor.google.com/corporate/2012/founders-letter.html http://investor.google.com/corporate/2012/founders-letter.ht...: "Larry, Sergey and Eric have agreed to subject their shares to a Transfer Restriction Agreement. This agreement will maintain the same link between their voting and economic interests that exists today, even if they sell some of their non-voting Class C shares. If the founders or Eric wish to sell or transfer their non-voting Class C shares, a “stapling” provision in the agreement requires them to either sell an equal number of Class B shares, or convert an equal number of Class B shares into Class A shares. "

yay_cloud 15y ago

I think it's important for people to realize that this is NOT a dividend scenario. No GOOG investor will gain value because of this transaction -- in fact, each GOOG investor will lose value (voting power) because of this transaction.

fletchowns 15y ago
each GOOG investor will lose value (voting power) because of this transaction Even though these new shares are non-voting shares?
dpark 15y ago
Each owner of GOOG will have exactly as many votes after this "dividend". They will not be negatively affected. New employees and acquisitions will be negatively affected by receiving stock sans voting rights, though.