Google sells $4 bn in stock

Paul Thomasch

NEW YORK: Google Inc. said it would sell up to 14.8 million shares, capitalizing on a stock that has tripled in one year to raise a further $4 billion, which analysts said was likely to be used for acquisitions.

Shares of the popular Internet search engine, Google, fell as much as 3.5 percent following news of the offering, which would increase the amount of the company's Class A common stock outstanding by about 8 percent.

The announcement, made in a filing with the U.S. Securities and Exchange Commission, came the day before Google's one-year anniversary as a public company. Since the initial public offering at $85 a share, the company's stock price has more than tripled.

"Our working assumption is that Google will use the proceeds for an acquisition, most likely in international markets," Citigroup analyst Mark Mahaney wrote in a note to clients.

Merrill Lynch analyst Lauren Rich Fine said speculation has been rampant about the timing of this move to raise funds and the various acquisition targets Google may have in its sights.

She listed possible Google merger candidates as Chinese Internet company Baidu.com, TiVo, the digital video recorder company, and InfoSpace, a rival search and mobile phone services company.

The proposed offering of 14.16 million or 14,159,265 before rounding -- and not including an underwriters' option for additional shares -- appears to be a nod to the digits found in the mathematical figure pi and underscores the unconventional approach the company often takes.

When it went public last year, for instance, it sold its shares through a version of a Dutch auction, pushing aside the norms of Wall Street.

While some analysts forecast the Mountain View, California-based company's stock could rise as high as $400 a share -- having already hit an all-time high of $317.80 -- Google itself has been cautious in statements about its outlook.

It faces fierce competition from Yahoo Inc. and Microsoft Corp. for advertising dollars and users, and it recently said its sequential revenue growth may slow. All of this could prompt it to look at acquisitions as a way to drum up new revenue, company watchers have said.

Indeed, Google said it could use the proceeds from the sale for the acquisition of "complementary businesses, technology and other assets" as well as for capital spending. It added, however, that it has not agreed to any deals.

Prudential analyst Mark Rowen said in a note to clients he believes the dilutive impact of the new shares would be muted by interest income Google earns from the offering proceeds. He also sees the company as probably eyeing potential purchases.

"We believe the company is building a war chest for future acquisitions," said Rowen, who has an "overweight" rating on the stock.

The stock sale would add to the company's coffers, giving it room for further all-cash investments. As of June 30, the company had about $2.95 billion in cash and cash equivalents.

Calculated from Wednesday's closing price of $285.10, the sale of new stock would be worth $4.21 billion. It includes a proposed offering of 14.16 million shares and an additional 600,000 shares that underwriters Credit Suisse First Boston and Allen & Co. would have the option to buy.

The company has been steadily hiring more staff and is expanding into services beyond Web search to free e-mail, Web logs, video search and comparison shopping, all of which carry the search advertising that pulls in most of Google's revenue.

Google shares closed down $5.11, or 1.8 percent, at $279.99 on Nasdaq after trading as low as $275.00 earlier on Thursday.