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Google Surprise: A New Stock Sale

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Another 5.3 million shares of GOOG, worth about $2.1 billion at current valuation, should help smooth the company’s entry into the S&P 500 index.

Google (NASD:GOOG) issued a statement today announcing it will sell 5.3 million new shares of stock to “partially meet the anticipated needs of index funds to purchase Google Class A common stock when Google is added to the S&P 500 Index at the close of trading on March 31, 2006.”

In trading today, Google closed at $394.98, gaining $17.78. After hours trading saw the figure retreat after the stock sale announcement, giving back some of today’s gains and dropping to $383.55 at press time.

Google submitted a Form S-3 with the Securities and Exchange Commission disclosing the planned sale. The search advertising company stated it would “use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures, and possible acquisitions of complementary businesses, technologies or other assets.”

Google also listed this among the caveats in the Form S-3 document: “We may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of your investment.”

That comes from provisions associated with the Investment Company Act of 1940, which exists to make companies “disclose their financial condition and investment policies to investors when stock is initially sold and, subsequently, on a regular basis.”

In their statement, Google noted how Goldman Sachs would be the sole underwriter of this sale. That represents a full 180-degree turn in that relationship since Google’s IPO. Goldman Sachs chairman and CEO Hank Paulsen made contact with Kleiner Perkins, a substantial investor in Google, in what Google angrily viewed as a “business as usual” practice.

That prompted Google to snub Goldman Sachs in favor of Morgan Stanley and Credit Suisse First Boston to underwrite the 2004 IPO.

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David Utter is a staff writer for WebProNews covering technology and business.

Google Surprise: A New Stock Sale
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