According to an SEC filing late this afternoon, Google’s founders Larry Page and Sergey Brin “each intend to sell approximately 5 million shares” — over a period of five years. This is not a reaction to any particular development in the market or perception of the outlook for Google; rather this is part of a plan to diversify their portfolios over time.
According to the filing:
These pre-arranged stock trading plans were adopted in order to allow Larry and Sergey to sell a portion of their Google stock over time as part of their respective long-term strategies for individual asset diversification and liquidity . . . Using these plans, they can gradually diversify their investment portfolios and can spread stock trades out over an extended period of time to reduce market impact . . .
Larry and Sergey currently hold approximately 57.7 million shares of Class B common stock, which represents approximately 18% of Google’s outstanding capital stock and approximately 59% of the voting power of Google’s outstanding capital stock. Under the terms of these Rule 10b5-1 trading plans, and as a part of a five year diversification plan, Larry and Sergey each intend to sell approximately 5 million shares. If Larry and Sergey complete all the planned sales under these Rule 10b5-1 trading plans, they would continue to collectively own approximately 47.7 million shares, which would represent approximately 15% of Google’s outstanding capital stock and approximately 48% of the voting power of Google’s outstanding capital stock (assuming no other sales and conversions of Google capital stock occur).
Google has a dual class stock structure, consisting of Class A and Class B stock. Currently Brin and Page control about 59% of the Class B stock, but a minority of all outstanding shares. Class A shares have one vote each and Class B shares each control 10 votes.
At the end of the five year diversification term specified in the SEC filing, the two co-founders would own 47.7% of Class B shares. And together with CEO Eric Schmidt they would still own more than 50% of the Class B shares.
There have been unsuccessful efforts in the past to equalize the voting power of all shareholders.
One could argue that this dual-class stock structure enables Google to do things like stand up to the Chinese government, against the dominant logic of the market and potential objections of Class A shareholders (especially institutional shareholders). Indeed, Microsoft CEO Steve Ballmer has criticized the move as “irrational.”
If sold today, the 10 million shares would be worth a little over $5.5 billion at Google’s current share price.