Google has settled an investor lawsuit that paves the way for it to issue Class C shares.
Google announced its intention to issue Class C stock last year, however the Brockton Retirement Board and shareholder Philip Skidmore sued the firm, claiming that the firm's co-founders Sergey Brin and Larry Page engineered the stock split in order to keep control of the firm. Google has now settled the lawsuit before the case was about to go to trial in a Delaware court.
Google's rocketing share price that currently stands above $850 highlights the demand for the firm's stock, but diluting the Class B stock would mean that Brin and Page would also lose some of their voting influence in the company as the pair own over 50 percent of all Class B shares, with each share having 10 votes per share. Page and Brin therefore wanted to issue Class C shares, which would carry no voting rights.
Google's legal agreement stipulates that the firm will have to pay Class C stockholders if the shares are worth less than the price of the Class A shares. The firm has also agreed that if the Class C shares are between one and five percent lower than the Class A shares it will offer a percentage of the difference to Class C shareholders in cash or additional shares.
Despite Brin and Page having founded Google, with various early investors taking a chunk of the firm, they have only around 15 percent of Class A shares. Page and Brin want to keep control of Google, but because it is a public company the only way they can do so is by keeping significant voting rights through Class B stock ownership.
With Google seemingly having overcome the hurdle posed by Brockton and Skidmore, the path now seems to be clear for it to issue new Class C shares.