Internet giant plans to issue new class of non-voting shares to use stock as currency without diluting holdings of co-founders or chairman.
Google has ruffled institutional feathers by announcing an unusual stock split that cements the control of senior figures. The internet giant plans to issue one new non-voting share for each share already in issue, allowing it to make acquisitions and reward employees without diluting the holdings of chairman Eric Schmidt or co-founders Sergey Brin and Larry Page, the company’s CEO.
The three men already have tight control of Google: they set up a dual-share structure at the IPO that gives their class B shares a 10-to-one voting advantage over common stock. In a letter to shareholders, Google said it recognizes some people will not support the move but it has decided with the board that a ‘founder-led’ governance structure is in the best interests of the company.
‘Having the flexibility to use stock without diluting our structure will help ensure we are set up for success for decades to come,’ the letter states. Google also pointed out that a stock split has long been requested by shareholders.
The stock is currently priced above $600. The move has generated concern among some powerful institutional investors. ‘We worry this will set a precedent for others to emulate this move,’ Janice Hester-Amey, a portfolio manager at pension fund CalSTRS, told Reuters.
Hester-Amey added that if the trio had wanted to maintain control, they might have ‘put their own capital behind it, instead of taking it out of the hide of the existing shareholders.’
She said CalSTRS is now engaging with Google about the split – as well as with other companies that might copy the move.
Complicating the picture is that Google still offers no dividend, unlike most other high-tech companies, notably now including Apple.