Google hatches split stock plan

As Google reports higher profits, its founders split stock to keep a tight grip on the company.

by Elizabeth Anderson
Last Updated: 04 Jan 2013
Google’s billionaire co-founders Larry Page and Sergey Brin are convinced they still have the winning formula. The owners of the world’s biggest search engine have announced they’re creating a new batch of non-voting stock which will give them a tight influence on the firm in the long term.

Existing Google shareholders will be given a slice of non-voting stock for every share they already own. This effectively gives them a two-for-one deal but means the voting power of Page and Brin isn’t diluted. Google’s co-founders, who own around 30% of the company between them, said this will mean Google preserves its corporate structure and allow it to remain focused on the long term.

Even back when it floated in 2004, Google’s governance structure was controversial, thanks to its use of A shares with limited voting rights to guarantee that executive control would remain with its founders. This new share split, whilst extremely unusual for a public company, effectively casts that original experiment in stone so is arguably nothing that Google investors aren’t already used to.

The idea, which has been approved by its board of directors and now has to be approved by shareholders, was unveiled as the company reported another strong set of results. Revenues were up 24% to $10.65bn (£6.7bn) in the first three months of 2012, and profits were up 61% to $2.89bn (£1.8bn).

The Californian firm is also optimistic about its investment in Android, Chrome and YouTube. The number of people using the Google Chrome browser has topped 200m; about 850,000 smartphones or tablet computers powered by Android software are activated daily; and YouTube has more than 800m monthly users, Google said.

Advertising, where most of Google’s revenue comes from, is strong, although cost-per-click – the average amount that Google charges advertisers when users click on an ad – fell by 6% compared to the previous quarter, and was down 12% on the year. This suggests the trend for accessing the web on smartphones is continuing to grow. Search ad rates are lower on mobiles than desktop PCs, and so probably accounts for the fall.

Meanwhile Google+ remains a working progress. Larry Page said that over 170m people have signed up to the social network, although the consensus among many analysts is that Google+ is struggling somewhat, and it’s unclear how many of these users remain active.

Either way, the message from Page and Brin to their investors is clear: ‘Trust Us’. And if this share split goes through, any shareholders who aren’t sure will have to decide whether to sell...

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