Google Selling $4.2 Billion of Stock One Year After IPO
Google is planning to sell 14.8 million more shares of its stock, an estimated $4.2 billion, a year after its initial IPO. Since their IPO last lear, Google’s stock share value has more than tripled and Google is now profit is up 500% from one year ago (pre-IPO). Question is, why is Google selling this much of the company and what are they going to do with the $4.2 billion.
With search advertising sales at a high and possibly slowing down next year, well not growing as fast, the obvious answer may be that Google is looking to expand its advertising network via new services or building new revenue generating options – like music downloads or launching a wireless ISP service. Of course, since we’re talking Google, using that money to acquire new, cutting edge, and profitable businesses is another option – such as Skype or their recent acquisition of Android Mobile.
According to Bloomberg, Google shares dropped $8.20 to $276.90 this morning on the Nasdaq stock market. Which leads to the next question – is Google stock overrated? A recent article in Fortune magazine argues that at over $275, Google stock is a bit inflated.
“The stock may be overvalued by as much as 160%. Its shares are trading at 79 times trailing earnings—compared to other Internet stars like Yahoo, which trades at 72 times earnings and eBay which is valued at 57 times earnings. But hardly anyone is sounding the alarm. Virtually all of the analysts who follow the company on Wall Street have a “buy” or “strong buy” on the stock. And Google is one of the largest holdings at top-ranked mutual funds such as Legg Mason Value and Marsico Focus, among others. But take a hard look at the numbers and you’ll wonder why.”