Google Settlement Removes One More Obstacle To Class C Stock Split

Michael Teague  |

A regulatory filing revealed on Monday that tech titan Google (GOOG) settled its class action lawsuit with one of its shareholders out of court, bringing the company one step closer to its aim of issuing Class C shares.

The Brockton Retirement Board had originally filed the suit against Google in early May, claiming that the company was being negligent of the interests of stakeholders as its stock-split scheme would create an unfairly disenfranchised class of non-voting shares. Brockton had been entreating a judge in the court of Chancery, Deleware, where the company is incorporated, to block the two-for-one split, and in its initial complaint accused co-founders Sergey Brin and Larry Page of attempting to position themselves "as dominant shareholders of Google by creating a non-voting class of Google stock in order to preserve their voting power into perpetuity,”.

Like many Silicon Valley firms, Google has since going public in 2001 been using a dual stock structure that bestows one vote a piece to its class A shares, while the company's founders remain firmly in control through their ownership of B class shares that carry 10 votes each. Page and Brin had devised the class C shares to trade publicly under a different ticker, allowing the company to sell more of its stock without management having to worry about losing control to the likes of activist investors.

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The terms of the settlement that have been disclosed stipulate that the company give holders of the new stock-class a cash or stock payment if the value of the C shares differs from the value of the A shares by more than one percent. A greater restriction to Brin and Page's three-tiered stock structure, however, came in the form of an agreement that would require the pair to sell class B shares whenever they sell class C shares, as well as consenting to a provision that would make it prohibitively difficult for the company's board to change the new rules.

The settlement still requires court approval, and comes amid a flurry of high-profile legal questions surrounding company. Recently, Google has been taken to task by European Union regulators over anti-trust allegations from its competitors throughout the continent, and has been taken to task for what many see as tax evasion through its use of Ireland's famously permissive tax-codes. Meanwhile, the company has sought to cancel out any damage from the NSA spying scandal that has broken out over the last week, with CEO Larry Page quick to make a loud and unequivocal proclamation that the company had not been asked to provide any information to U.S. intelligence agencies, and urging the federal government to allow tech companies to notify their users in the event that such requests for information are made of them.

The company's shares ended Monday on an advance of 1.28 percent to $886.25.

[Image via Flickr]

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