From the first founders' letter -
“We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long term bet on the team, especially Sergey and me, and on our innovative approach...
.....In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google.…
...The main effect of this structure is likely to leave our team, especially Sergey and me, with increasingly significant control over the company’s decisions and fate, as Google shares change hands…
Our colleagues will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long term…
As an investor, you are placing a potentially risky long term bet on the team, especially Sergey and me. …. Sergey and I are committed to Google for the long term.”
From the 2012 founders' letter -
"...In our experience, success is more likely if you concentrate on the long term....We have protected Google from outside pressures and the temptation to sacrifice future opportunities to meet short-term demands...
...Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before....It’s effectively a two-for-one stock split—something many of our investors have long asked us for.....
...In November 2009, Sergey and I published plans to sell a modest percentage of our overall stock, ending in 2015. We are currently halfway through those plans and we don’t expect any changes to that, certainly not as the result of this new potential class. We both remain very much committed to Google for the long term."
From the 24 July 2012 - 10Q
".... The amendments authorize 3 billion shares of class C capital stock and also increase the authorized shares of class A common stock from 6 billion to 9 billion. The amendments are reflected in our New Charter, the adoption of which was approved by stockholders at our 2012 annual meeting of stockholders held on 21 June 2012. We have announced the intention of our board of directors to consider a distribution of shares of the class C capital stock as a dividend to our holders of class A and class B common stock."
End of quotes
Corporate governance - control...more of it!
Presently, Google has class A shares which are traded and class B shares (having much higher voting power and mainly owned by founders) which are not traded.
Now the company has announced a dicey corporate governance structure which provides for issue of 1 class C share (new class) which will be traded separately against 1 existing class A (same for class B) share. Is it a stock split...or..a stock dividend? I don't know. Google calls it both, sounds weird? That does not matter in the larger scheme of things.
The fact is that the market value of the company should not change post this structure as nothing fundamental has taken place with respect to its cash flows, reinvestments, growth and risks, or so we hope.
But here is the catch: class C shares will have no voting rights, effectively cutting the existing voting rights by 50%! Not that it matters to an ordinary shareholder, for someone said, that is the most docile and apathetic animal in captivity. Shareholders' rights and powers look good on paper not in practice.
A shareholder who currently owns, for instance, 1000 class A shares of Google will get 2000 shares (1000 class A shares with voting rights and 1000 class C shares without voting rights). The market value is supposed to remain the same on a combined basis.
The board has not set a record date for the issuance of the class C shares.
The bully: management has announced clearly as before their intention to hold control and call shots whether a shareholder will like it or not. That is exactly what they want. Considering this it is doubtful if they will issue class A shares again.
Would it really matter to a shareholder?
Considering the ordinary shareholders' position, intent, time and power, it would hardly matter. The market value of the shares do not change and the shareholder does not care for vote anyway especially when the management already has majority control.
The change in voting power should look like this: Class A has 1 vote per share; class B has 10 votes per per share; class C has no voting power.
It's bonkers!
This is as per the present understanding. The real damage however depends on the total number of voting and non-voting shares in the business.
Because of lack of voting power the class C shares should be selling at a discount and class A shares at a premium. Whether they will, and if so, by how much, I will tell you once I know.
Clearly, Google stock is meant for those animals in captivity - take the piece of the meal thrown at, eat and enjoy, but dont' complain. In management's own words....you are placing an unusual long term bet on the team.....As an investor, you are placing a potentially risky long term bet on the team...
With all this, there is no denying that Google has in fact changed our lives significantly. It has become a free educational institute. To see why, just google it!
As long as management is doing a good job, that is, operating the business and allocating capital well, there is no reason to complain.
Here's what they have given to the shareholders, the meal...(source: yahoo finance):
Can googlies be good? Your call.
“We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long term bet on the team, especially Sergey and me, and on our innovative approach...
.....In the transition to public ownership, we have set up a corporate structure that will make it harder for outside parties to take over or influence Google.…
...The main effect of this structure is likely to leave our team, especially Sergey and me, with increasingly significant control over the company’s decisions and fate, as Google shares change hands…
Our colleagues will be able to trust that they themselves and their labors of hard work, love and creativity will be well cared for by a company focused on stability and the long term…
As an investor, you are placing a potentially risky long term bet on the team, especially Sergey and me. …. Sergey and I are committed to Google for the long term.”
From the 2012 founders' letter -
"...In our experience, success is more likely if you concentrate on the long term....We have protected Google from outside pressures and the temptation to sacrifice future opportunities to meet short-term demands...
...Today we announced plans to create a new class of non-voting capital stock, which will be listed on NASDAQ. These shares will be distributed via a stock dividend to all existing stockholders: the owner of each existing share will receive one new share of the non-voting stock, giving investors twice the number of shares they had before....It’s effectively a two-for-one stock split—something many of our investors have long asked us for.....
...In November 2009, Sergey and I published plans to sell a modest percentage of our overall stock, ending in 2015. We are currently halfway through those plans and we don’t expect any changes to that, certainly not as the result of this new potential class. We both remain very much committed to Google for the long term."
From the 24 July 2012 - 10Q
".... The amendments authorize 3 billion shares of class C capital stock and also increase the authorized shares of class A common stock from 6 billion to 9 billion. The amendments are reflected in our New Charter, the adoption of which was approved by stockholders at our 2012 annual meeting of stockholders held on 21 June 2012. We have announced the intention of our board of directors to consider a distribution of shares of the class C capital stock as a dividend to our holders of class A and class B common stock."
End of quotes
Corporate governance - control...more of it!
Presently, Google has class A shares which are traded and class B shares (having much higher voting power and mainly owned by founders) which are not traded.
Now the company has announced a dicey corporate governance structure which provides for issue of 1 class C share (new class) which will be traded separately against 1 existing class A (same for class B) share. Is it a stock split...or..a stock dividend? I don't know. Google calls it both, sounds weird? That does not matter in the larger scheme of things.
The fact is that the market value of the company should not change post this structure as nothing fundamental has taken place with respect to its cash flows, reinvestments, growth and risks, or so we hope.
But here is the catch: class C shares will have no voting rights, effectively cutting the existing voting rights by 50%! Not that it matters to an ordinary shareholder, for someone said, that is the most docile and apathetic animal in captivity. Shareholders' rights and powers look good on paper not in practice.
A shareholder who currently owns, for instance, 1000 class A shares of Google will get 2000 shares (1000 class A shares with voting rights and 1000 class C shares without voting rights). The market value is supposed to remain the same on a combined basis.
The board has not set a record date for the issuance of the class C shares.
The bully: management has announced clearly as before their intention to hold control and call shots whether a shareholder will like it or not. That is exactly what they want. Considering this it is doubtful if they will issue class A shares again.
Would it really matter to a shareholder?
Considering the ordinary shareholders' position, intent, time and power, it would hardly matter. The market value of the shares do not change and the shareholder does not care for vote anyway especially when the management already has majority control.
The change in voting power should look like this: Class A has 1 vote per share; class B has 10 votes per per share; class C has no voting power. It's bonkers!
This is as per the present understanding. The real damage however depends on the total number of voting and non-voting shares in the business.
Because of lack of voting power the class C shares should be selling at a discount and class A shares at a premium. Whether they will, and if so, by how much, I will tell you once I know.
Clearly, Google stock is meant for those animals in captivity - take the piece of the meal thrown at, eat and enjoy, but dont' complain. In management's own words....you are placing an unusual long term bet on the team.....As an investor, you are placing a potentially risky long term bet on the team...
With all this, there is no denying that Google has in fact changed our lives significantly. It has become a free educational institute. To see why, just google it!
As long as management is doing a good job, that is, operating the business and allocating capital well, there is no reason to complain.
Here's what they have given to the shareholders, the meal...(source: yahoo finance):
Can googlies be good? Your call.
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