Sunday, January 24, 2010

Google Founders Selling Shares

Sergey Brin and Larry Page, the founders of Google, will sell off 10 million of their shares in Google.

This trade, revealed in a Google SEC filing, is to take place over the next five years. Brin and Page will be selling approximately 17% of their Google holdings, reducing their voting rights in the company from 59% to 48%. While this does mean that Page and Brin are giving up majority control in the company, in reality, they’re not ceding much. Although they will not have the majority voting rights, barring some bizarre unforeseen circumstance that splits their votes, they maintain enough voting rights to make it nearly impossible to vote against them.

Google, seeking to downplay the significance of this trade plan, stated that this was a regular occurrence among the founders of publicly traded companiesIndeed, Bill Gates has followed a similar procedure with his stake in Microsoft, selling predetermined amounts of shares every year. In an emailed statement, Google said “They are both as committed as ever to Google and are integrally involved in our day-to-day management and product strategy. The majority of their net worth remains with Google.”

The question is, how should Google shareholders read into this divestment by the founders of the company? Is it a lack of confidence in the company’s future? Is it prompted by board politics? Is it simply Brin and Page deciding that they could each use an extra $2.75 billion (to buy matching fleets of yachts?)? It seems that the most correct explanation is the third. They’re still keeping the majority of their money in the company, so a relatively (percentage-wise, not in terms of real dollars) small sale shouldn’t inspire fear in the shareholders.