It must want to buy something. No other explanation jumps to mind for why a cash-gushing monster with an $8 billion war chest would toss away another 5 million shares in tonight’s shelf filing.
Scheduled 2006 big ticket items are $1 billion to AOL for the search deal, $1 billion (rumored) to Dell for the Google Pack deal, and $1-$2 billion for capex, all offset by an estimated $2-$3 billion of positive cash flow. Add that together and you get a net 2006 cash outflow of maybe $1 billion, leaving $7 billion on the balance sheet–more than enough to compete with anyone except…
Yes, but if the point is to get into a “mine’s bigger” war with Microsoft, then why not raise $20 billion? No, $7 billion is plenty, unless you want to buy something.
Facebook? MySpace (for cash and stock, giving News Corp. a big Google stake)? The rest of AOL? Tell me? Keep ’em coming… After reading Battelle, my money’s on Facebook.
A Google press release confirms the deal and notes that Goldman was the sole underwriter (lucky them). The press release also implies that one reason for doing the deal was to make sure there is enough stock available for all the index funds that have to load up on it between now and Friday.
Translation: We didn’t want the stock to soar and then crater, subjecting us to another round of mercilous pounding at the hands of the press, investors, and blogosphere. How’s that for not being evil? (And how’s that for not being altogether straightforward?).
This “index-fund offering” justification seems to have gained instant credibility, with Safa and others deeming it the height of mundanity and common sense. If so, it’s the first I’ve heard of the practice.
Another common theory on the acquisition side is Asia expansion–perhaps China specifically, where Google is getting its clock cleaned. Cash vs. stock would be very helpful here.