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Google Files to Sell 14.2 Million More Shares
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?"
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.)
"There are a dozen opinions on a matter until you know the truth. Then there is only one." - CS Lewis (paraprhase)
And I say this as someone who's been investing since the 1970's and didn't panic during the IPO craze of the late 90's - which was very very good to me and my family ...
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.
-- Tigger warning: This post may contain tiggers! --
I think that Google is a great company, but I cannot see how their insane stock price is justified. It is all just speculation.
/ url%5D I mean, check out their P/E ratio!
[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.
Try to hack my 31337 firewall!
14.159,265 million shares to be exact. 3.14159265... Cute...
Besides the Google Instant Messenger client rumor, there are quite a few other opportunities that Google might be trying to fund.
Well there's that Broadband over Power Line rumor. And the massive country-wide Wi-Fi rumor. Also the streamable Google Operating System. Oh and the Google Browser rumor
And lets not forget Google needs some money to finance their trip to Mars
Sigs are for Terrorists.
Value of PI == 3.14159265....
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.
Impossible. It's CNET. "Reporters" never worked there in the first place.
You have got to be kidding?
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.
As I originally stated, as long as fair market value is obtained, it's theoretically useless... As stated elsewhere in the thread, I basically gave a textbook explanation.
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