Gordon Smith takes us through the most recent changes to Google’s SEC registration statement. I too find the document somewhat confusing. Why does the Class A Senior Stock have 10X the voting rights of the Common Stock? The information on how the directors are chosen is also very interesting.
Name (Pre-IPO Voting Power)
Eric Schmidt (6.3)
Sergey Brin (16.4)
Larry Page (16.4)
L. John Doerr and Kleiner Perkins (10.2)
Michael Moritz and Sequoia (10.2)
Class (or Series) A stock is the “preferred” stock that you hand out to your venture investors who are taking all the risk when they fund you during start-up. In exchange, those investors typically ask for preferrential treatment in form of liquidation preferences and better voting rights. Pretty sure that all the preferred stock classes get converted to “common” shares upon IPO.
While Peter is correct in most circumstances, my understanding is that Google is attempting to keep “insider” control as part of their long range focus. Insiders will hold shares of this supervoting stock to retain control. This is either good or bad depending on who you think is good or bad.
There seems to be a little bit of talking past each other here. In my post on Venturpreneur, I was expressing confusion about the pre-IPO capital structure. Peter is right about the VCs usually getting preferred stock. Nothing strange there. But why did Google create two classes of common, one with super voting rights? There are reasons one might do this, but normally you see the super voting stock held by a small cadre of inside control people. In Google’s case, the super voting stock was the basic stock held by every common stockholder. The founders owned a small number of shares of a separate class of common stock, with one vote per share, but the number of shares in that class was small.
Also, Jake is right that Google keeps the dual-class structure in place after the offering, and the purpose of that is to maintain control in the founders. This is easy to understand, though people differ on whether it is a good idea.
Thank you everyone for your comments!