It looks like Google Inc (NASDAQ:GOOG) is closer than ever to a stock split, but if it splits too soon, the company might miss a major milestone. The search giant announced a split more than a year ago, but then investors sued it over the split of its common stock.
Google’s Previous Plan
Bloomberg’s Jef Feeley and Phil Milford report today that Google Inc (NASDAQ:GOOG) may have settled the lawsuit just in time to prevent a trial. Investors filed the suit because they said it would make it possible for Google co-founders Sergey Brin and Larry Page to strengthen their control over the massive company unfairly.
Under the terms of the original split plan, Google wanted to issue a new class of stock that did not come with voting rights. Shareholders of Google would receive one share of the new class of stock for every share they had before. Also employees who were granted stock in the future would receive shares of the non-voting stock class.
Details On Google’s Settlement
Court filings indicate that lawyers for various investors and also a pension fund in Massachusetts were planning to begin presenting their arguments tomorrow in court. Shareholders who filed the suit against Google Inc (NASDAQ:GOOG) claimed that the non-voting stock class would give the company’s co-founders too much control. However, lawyers for the company said the new stock was an attempt to make it more flexible when it comes to acquiring companies and also rewarding its employees. It would also enable Brin, Page and CEO Eric Schmidt to continue controlling the company.
Google’s New Proposed Stock Split
Google Inc (NASDAQ:GOOG) reach a tentative settlement with the plaintiffs, and the board approved that settlement over the weekend. A judge must still approve the settlement, which requires advance warning for any stock policy amendments. It also calls for increased scrutiny if Brin and Page increase their voting control and provides for “reasonable” fees and expenses for lawyers of the plaintiffs in the case.
The plan still calls for Google Inc (NASDAQ:GOOG) to give shareholders two shares of the new stock for every share they own, and the company’s stock price is cut in half. However, the Class C shares will still not hold any voting power. Under the settlement, Google said it would consider using voting shares as part of any of its future acquisitions rather than non-voting shares.
If Page and Brin begin to sell off their shares, the company might think about getting rid of its multi-class stock system. They can’t sell their non-voting shares unless they sell the same number of Class B super-voting shares. Also it prevents holders of Class B shares from getting any change-of-control premiums.
CNN Money’s David Goldman notes that Google already gives the Class B shares, which are held by the company’s founders, 10 votes per share. At this point, it gives the company’s two founders and its CEO a combined 64 percent of the voting power.
There’s been speculation in recent months that Google Inc (NASDAQ:GOOG) will hit $1,000 per share. If the company does its stock split soon, we might never see that major milestone. The stock first passed the $900 per share mark in May. Today it’s trading just under $900 per share after rising 1.43 percent.
