Google Files to Sell 14.2 Million More Shares 407
dabug911 writes "Google Inc. on Thursday said it has filed with the Securities and Exchange Commission to sell 14.2 million shares of class A common stock, an offering worth more than $4 billion at Wednesday's closing stock price.
Could they be getting the money together to finance all these rumors we keep reading about?"
looks like a... (Score:1, Insightful)
Oops, hit submit early/thats how google operates.. (Score:2, Insightful)
They just wait for rumors to appear about what they're going to do next, then just finance them and build them quickly...
Cashing inflated stock (Score:2, Insightful)
Or are they cashing their extremely inflated stock?
Recurrent capital raising (Score:1, Insightful)
All these diverse ofeerings come at a cost - some will be hugely successful, and some will not. The fact that Google is having to go back to the well so soon is possibly a sign that their expansions aren't as profitable as they'd like as much as a sign of desire for more expansion.
Jedidiah.
Re:Cafeteria (Score:4, Insightful)
Being generous and assuming the cost of a person's labor for 1 year to the company is $100k, this means $4 billion would purchase 40,000 man-years of labor. Considering the world per-capita income is actually closer to around $20,000 (which is still high, mind you, but it makes for simpler math), that would be 200,000 man-years of labor.
What the heck are these guys doing that's going to require somewhere between 40,000 and 200,000 man-years of effort? (Remember, the cost of everything turns back into man-years of effort.)
Re:Cashing inflated stock (Score:2, Insightful)
Today's issuance of new stock is why the price is down almost 7 bucks today...dilution.
Secondary IPOs are frequently not worth investing (Score:5, Insightful)
Just because a stock is valued at $XX today doesn't mean it can't just as easily go down as up.
And when something is new to the market, valuation is still uncertain and the risk of it going down - contrary to most investors expectations - is higher than the risk of it going up.
However, as a caveat, I should say that some of the secondary offerings and post-IPO investments in certain companies have been very very profitable for me - Red Hat, Coach - which I bought at IPO, held for a bit, sold all or part of, and bought back in when most insiders unloaded their shares.
So, it's more a question of: Is Google worth MORE than this valuation in the future and is this BETTER than other investments?
I'm putting money in Japan and Euro value plays mostly - with money in dividend yielding energy stocks that AREN'T oil-based (wind, solar, geothermal, nuclear fission, clean coal).
But if you want to spend your money, do what I do - never invest more than you can lose, and if it's risky - unless you're really really certain [e.g. RedHat or Coach in my case] - spend LESS than on a typical investment.
For example, I usually invest around $10,000 in a normal investment, $5000 in a slightly risky investment [a hunch], and $1000 in a highly risky investment [most IPOs and risky stocks].
Your mileage may vary.
Re:This Just In! (Score:3, Insightful)
hmm... not sure this shouldn't get an insightful mod too...
Dot Com all over again? (Score:5, Insightful)
[url]http://finance.yahoo.com/q/bc?s=GOOG&t=1y%5B
Google is very cool, and their mission is basically to become the next library of Alexandria, which I think is awesome. However, how on earth do they plan to make any MONEY?
(For those of you who are considering buying some of this new issue, I strongly suggest you read 2 books: "The Intelligent Investor" By Ben Graham and "The Future for Investors: Why the Tried and True Triumph Over the Bold and New." by Jeremy J. Siegel.)
Google is very cool - but it is really just grep on steroids. I can't see how shares in this company at this point will benifit the shareholder.
Selling a piece of PI (Score:5, Insightful)
Re:Umm... (Score:5, Insightful)
Well there's that Broadband over Power Line rumor [slashdot.org]. And the massive country-wide Wi-Fi rumor [slashdot.org]. Also the streamable Google [infoworld.com] Operating System [kottke.org]. Oh and the Google Browser rumor [slashdot.org]
And lets not forget Google needs some money to finance their trip to Mars [google.com]
Actually, its 14,159,265 shares (digits of PI) (Score:3, Insightful)
Google sells == 14,159,265 shares...
You have to love a company so cool that even something as boring as a secondary stock issue can be made into an inside joke for geeks.
Re:Cashing inflated stock (Score:3, Insightful)
Re:They're gonna buy CNET (Score:5, Insightful)
Smart move! (Score:2, Insightful)
Benefits the original shareholders handsomely, and if your stock is hyped enough, you will not suffer any "pecking order" side effects.
Re:Selling a piece of PI (Score:2, Insightful)
You're entirely wrong about Marx and capitalism (Score:2, Insightful)
Marx argued no such thing. What Marx argued is that everyone deserves to own the products of his or her own labor. The position you present as Marx's was that of Bauer and other left-Hegelians that Marx had little truck with.
``Lefties argue mostly the same thing -- that everyone is equal''
As do most righties, or at least what passes for a right wing in today's post-modern world. For the most part, left and right are both firmly in the tradition of classical liberalism which presupposes that everyone is fundamentally autonomous and, in this sense, is equal. This view stands firmly in opposition to the classical conservative position that some people, by virtue of their nobility, were more equal and deserved to be kings, queens, dukes, or duchesses.
Now, a small portion of the modern day left-wing espouses various forms of egalitarianism. That said, most lefties recognize that there are natural differences between various persons. What the the left tends to argue is that, as Rousseau observed, that certain artifacts of social life have magnified these natural differences to the point where they are absurd and detrimental to human progress as a whole.
``Capitalism is not the inverse of this (as most Lefties mis-interpret it). It declares that the capital (and means of production) should (and eventually will) flow to those most capable of using it efficiently; to produce a maximal, non-trivial result.''
But the problem is that Capitalism depends on assumptions about the free market that are demonstrably untrue. The elements of ``perfect competition'', as but one example, are absurd. There is no perfect freedom into and out of every industry, rather, every industry has a rather large barrier to both entry and exit. Consumers and producers do not have perfect knowledge of past, present and future. Consumers do not always buy at the market equilibrium price. Producers do not always sell at the market equilibrium price. Not all goods are identical commodities as demonstrated by the effects of branding upon the market.
You were complaining about the maxim that ``Remember, the cost of everything turns back into man-years of effort.'
This notion is the foundation of neo-Ricardian economics. Modern neo-Ricardian economics can account for well over 90% of the fluctuations in prices in the free market. Neo-Classical supply/demand price theory, which you seem to be equivocating with capitalism, cannot come close to this empirical track record. Pick up Sraffa's ``The Production of Commodities by Means of Commodities'' for a good starting point.
``Proof: You spend 1 man-year acquiring a shovel and digging a ditch. I spend 364-man days designing, acquiring parts and building a back-hoe, and 1 day digging 100 times as much ditch.
``You are claiming that these man-years are identical. They are clearly not, hence your premise is false, by reductio-ad-absurdium.''
Actually, you just misunderstand the labor theory of value which argues that the value of a product is always determined by labor. One does not have to assume, as you do in your 'proof', that all labor is identical in value, only that there is a direct causal relation between the labor that creates a product and the value of that product. In this view, most firms set their own price rather than the price being determined by a market equilibrium. Consequently, you're argument is entirely built of straw.
Quixotic (Score:2, Insightful)
1) If Google really wants to acquire companies, they can do so with stock rather than cash. Wall Street would look more kindly on an all stock transaction, rather than an offering followed by a cash transaction. In that context, the only reason to do this offering is to monetize stock that is seen as overpriced by the management of either Google or its acquisition targets, or both.
2) If instead Google wants to use this money to fund organic growth, the scale of investment it implies is staggering. Google has a few billion in cash and is generating free cash flow at a rate closing in on a billion a year. If that is not enough cash for Google's organic growth needs, one has to wonder whether they are in need of some adult supervision.
3) If Google wants to sit on the cash and earn interest, without any other near term goal, that is an admission that in the view of management, Google's stock appreciation potential is no better than current 4 or 5% interest rates. That would hardly be good news for investors, who are paying a high P/E premium in the expectation of market-beating growth. This inescapable conclusion seems to be lost on Mark Rowen at Prudential, who claims that the dilutative impact of this offering will be offset by interest earned on the proceeds, all the while reaffirming his price target of $400! Only an fool would want a stock with 40% appreciation potential diluted with cash earning 4%. Such a statement can only be disingenuous; either Rowen is desperate to put a positive spin on bad news, or he does not believe his own price target.
I'm genuinely curious if anyone can come up with a financially rational positive spin on this news.
Martin
Re:um...Where's Google's money come from? (Score:4, Insightful)
Those "domain park" sites are often up in the google search hits, and they are useless when I accidentally click on one of them. I've learned how to visually filter them out now.
If that is really a good source of income for google, I would assume that this is only as temporary as the "put it on the web and make millions" that happened in the late 90's and early 00's.
Sure people may click though them now, but I don't see this lasting.
It's not STEALING (Score:4, Insightful)
You invest $1 in company X.
The company is worth $100, and you own 1%, 1 share of 100 outstanding.
Company X realizes that it needs $100 to expand.
Company X sells 100 shares, and receives $100.
The company is now worth $200. Basically, this was a neutral event, no effect on income statement, and on the balance sheet, Cash (an asset) went up by $100, and Paid in Capital went up by $100.
Any analysis of the stock should figure out the value of the business (not counting cash), plus the cash on hand... P/E doesn't, but a discounting cash flow should. P/E is a simple overview and assumes that cash in a "normal amount."
You still own 1 Share, worth $1. You are EXACTLY where you were before.
However, you have half the "ownership."
Now, if the company uses that $100 to create $200 (of value), in one year, the company is now worth $400. Your one share is worth $2.
Now, without dilution, your share (1%) would be $4, but that isn't real, because without that $100 the company would still be worth $100, so you'd only have $1.
See? That increases your value, IF the cash is put to good use.
If the company screws up, and when they sold 100 shares, they only received $50 because of all the fees, then the company was worth $150 and your share 75 cents, OH NO. If they turn that $50 into $100, the company is worth $200, and you are back to $1. If they turn that $50 into $0, bought pets.com, then the company is only worth $100, and your investment is worth 50 cents.
In other words, if you believe management has a positive use of cash, this is a positive event (although I'd prefer debt given Google's high P/E and therefore high discount factor... or the market expects MASSIVE growth for YEARS without a high discount factor).
If you believe management has a crappy use of cash... well, this is a bad event. However, if they really misuse their cash, you should sell the stock while it is worth $1, before it becomes worth $0.
Alex