Google is selling another lot of shares to raise $4 billion |
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Sat, 20 Aug 2005 00:35
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MOUNTAIN VIEW, California: In a surprise move that rattled the stock markets, Google Inc. announced that it is selling another lot of its shares, up to a value of $4 million, exactly a year after its IPO. The search company gave little details of what it intends to do with the funds generated except hinting there could be acquisitions.
The company which had one of the most successful IPOs in history in August last year, filed a registration statement with the Securities and Exchange Commission giving out its intention to sell 14.6 million A class shares. The company's share had closed at $285.10 Wednesday. The company, already rich by $3 billion in cash, said it will make use of the funds generated out of the sale to finance its continuing operations and acquisitions. The statement read: "In addition, we may use proceeds of this offering for acquisitions of complementary businesses, technologies or other assets."
Analysts described the development as typical of Google, whose founders Sergey Brin and Larry Page are fond of cryptic moves and announcements. The company does not believe in offering earnings and revenue forecasts and its investments in research and development and in hiring talent are legion. One such statement in the registration document read this way: "We may apply the proceeds of this offering to uses that do not improve our operating results or increase the value of your investment."
Google's shares on Friday fell $5.11, or 1.8 per cent, closing at $279.99 on the Nasdaq.
Analysts pointed out that the new offering will dilute the ownership of existing shareholders by about 5 per cent.
Some analysts feel that Google is being opportunistic to encash on the good times. Future may not hold the same for the company. The company's revenue, which almost doubled in 2004 to $3.19 billion, may not register the same growth rate in future as search business is almost maturing and there are other serious players in the arena. The company's expenses are rising in view of its hiring spree and on account of additional funds pumped into developing newer products. Its second quarter expenses stood at $908.8 million, an increase of 12 per cent compared with the first quarter and 72 per cent compared with corresponding previous year period. Its net income of $342.8 million and profit margins of 25 per cent for the second quarter are less than those posted in the first quarter.
There are also analysts who feel the move is indeed aimed at expansion beyond the existing realms of search and e-mail. It is indicative of a move to take on competitors head on. Acquisitions could be one of the strategies.
The company had acquired Dodgeball.com, a website that allows phone users to monitor friends' locations, and Urchin Software Corporation, which deals in online advertisement technology. It had recently bought Keyhole Corporation, a mapping service provider. Yesterday it announced the acquisition of Android Inc. The company has a stake in Chinese search engine Baidu.com and this company may be a possible acquisition target.
Morgan Stanley, Credit Suisse First Boston and Allen & Company will be the underwriters for the offer. They will have the option to buy 600,000 additional shares to cover over allotments on top of the offered 14.16 million shares.
The sale may prove to be a record of sorts as it is likely to exceed the $3.99 billion secondary offering by Goldman, Sachs in 2000, hence becoming the largest U.S. sale in the last 10 years.
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