Google is planning to sell an additional 5.3m shares. The main reason, according to the press release, is to increase the supply of shares available in the market, as the search engine will be added to the S&P 500.

What that doesn’t answer the question: why does Google need the $2.1bn that the floatation will bring?

The SEC filing doesn't give us anything either. It is using standard phrasing to say that there is nothing to say:

"We anticipate that we will use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures. In addition, we may use proceeds of this offering for acquisitions of businesses, technologies or other assets that we believe will complement our business."

The acquisition note would be interesting, if Google wouldn't have used the exact same phrasing last year in August when the company sold an additional $4bn.

Surely you should buy an umbrella when it isn't raining. Google will have an easier time getting cash now that the company is still hot. But the more outstanding shares, the worse some of the key performance indexes are going to look.

Google as of 31 December 2005 had cash reserves of $8bn, according to its annual report. The company in the same document however pointed out that Microsoft (which the company considers one of its main competitors) has "significantly more cash resources than we do".

Anything beyond that is speculations. I'm going with the umbrella theory.

Tags: google, stock exchange, Microsoft

31 Mar 2006