INTERNET ADVERTISING BROKER Google has settled an investor lawsuit that paves the way for it to issue Class C shares.
Google announced its intention to issue Class C stock last year, however the Brockton Retirement Board and shareholder Philip Skidmore sued the firm, claiming that the firm's co-founders Sergey Brin and Larry Page engineered the stock split in order to keep control of the firm. Google has now settled the lawsuit just a day before the case was about to go to trial in a Delaware court.
Google's rocketing share price that currently stands above $850 highlights the demand for the firm's stock, but diluting the Class B stock would mean that Brin and Page would also lose some of their voting influence in the company as the pair own over 50 percent of all Class B shares, with each share having 10 votes per share. Page and Brin therefore wanted to issue Class C shares, which would carry no voting rights.
Google's legal agreement stipulates that the firm will have to pay Class C stockholders if the shares are worth less than the price of the Class A shares. The firm has also agreed that if the Class C shares are between one and five percent lower than the Class A shares it will offer a percentage of the difference to Class C shareholders in cash or additional shares.
Despite Brin and Page having founded Google, with various early investors taking a chunk of the firm, they have only around 15 percent of Class A shares. Page and Brin want to keep control of Google, but because it is a public company the only way they can do so is by keeping significant voting rights through Class B stock ownership.
With Google seemingly having overcome the hurdle posed by Brockton and Skidmore, the path now seems to be clear for it to issue new Class C shares. µ