Google (NASDAQ:GOOG) (NASDAQ:GOOGL) co-founders Larry Page and Sergey Brin will each be selling 2 million of their Class B shares, as well as 2 million Class C shares each. All together, these 4 million Class B and 4 million Class C shares are equivalent to about $4.4 billion.
According to a SEC Form 8-K filed on February 13, a stock sale will be conducted in accordance to the company's newly adopted Rule 10b5-1 trading plan and as part of a two-year diversification plan. The sale will be spread out over time to avoid materially affecting Google's share price by any sudden large block of shares being sold.
Google has a share structure made up of three classes of stock. Briefly, these classes are:
- Class A βΓ confers the right of one shareholder vote per share
- Class B βΓ confers the right of ten votes per share
- Class C βΓ no voting rights are conferred to shareholder
After the co-founders each sell 2 million Class B shares in a staggered manner over time, they will still retain 52% of the voting power. This assumes that no other changes in the total number of outstanding shares take place during that time.
Within the transaction, the Class B stocks will convert to Class A common stock. Along with the proposed sale of Class B shares, both Page and Brin will also sell 2 million Class C shares. Presently, the two men hold 13.1% of Google's outstanding shares of Class C stock, made up of 44.6 million shares.
Class C stock
Class C stock began trading in April 2014 under the GOOG ticker. Class A stock then began trading under the GOOGL ticker. Having a non-voting right Class C stock would allow such stock to be issued to executives and employees without the concern of weakening or diluting the voting power of shareholders like co-founders Page and Brin. Together, they currently control 54.6% of the voting power of Google's outstanding voting stock before the proposed stock sale begins.
Following the proposed sale, their collective total would become 40.6 million shares, or 11.9% of the total number of outstanding Class C shares.
The previous share diversification sale plan
This is not the first time the co-founders have sold shares in this fashion. Starting in 2010, the two began selling to diversify their personal portfolio holdings in a similar way as the newly proposed sale plans. Their intention was to sell 5 million shares over a period of five years (January 2010 β January 2015). At the time, that share amount was equivalent to about $5.5 billion.
Chairman Schmidt's 2013 share sale
Google chairman Eric Schmidt also previously had a similar plan to sell 3.2 million shares of Class A stock, worth about $2.5 billion at the time. That plan began in early 2013 and proposed a one-year time period within which to sell the shares, again to reduce the market impact.
On the February 8, 2013 day of that share sale plan announcement, the stock did sell down 0.5% in after-hours trading, yet there was no significant sell-off in Google shares in the following days or weeks. Google stock continued climbing throughout much of 2013, so it seems there was no adverse effect to share performance.
Google (GOOG, Financial) share price chart 2010 - Present
Source: Google Finance
Judging from the previous two staged share sale plans, current Google shareholders shouldn't be overly concerned about an effect on short-term share price performance in relation to this newly proposed plan. It does mean that Page and Brin will continue to possess a controlling majority of shareholder voting together, so the two directors can maintain their influence on Google's future direction and business development.
