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Google hopes to sell US$2 billion worth of shares

Google Inc plans to sell another 5.3 million shares of its prized stock, hoping to raise more than US$2 billion to finance its ambitious plan to expand beyond its Internet-leading search engine.

The move comes just two days before Google's closely watched stock will be added to the Standard & Poor's 500 index -- a breakthrough that snapped the company's shares out of a recent funk and presented management with an opportunity to capitalize on the surging demand.

In a Securities and Exchange Commission filing late on Wednesday, Google said it expects to sell the 5.3 million shares primarily to index funds who must own a stake in the company because it's now in the S&P 500. Google's market value has climbed by more than 15 percent since Standard & Poor's said it would include the company's stock in the blue-chip bellwether.

Based on Wednesday's closing price of US$394.98 on the NASDAQ Stock Market, Google's offering would raise about US$2.1 billion.

But news of the offering raised a red flag for some investors worried that extra shares will make it harder for Google to reach the lofty earnings-per-share target set by analysts.

The additional shares sold in the offering means Google will probably have to earn an additional US$45 million to US$50 million this year to match the average earnings estimate of US$8.82 per share among analysts polled by Thomson Financial.

The company expects to have 305.4 million shares outstanding after the latest offering, up from 271.2 million shares at the time of its initial public offering. Google's market value has increase by about US$100 billion since the company went public.

Google's SEC filing indicated the company will sell its latest round of stock some time next month.

Even as its iconoclastic founders have thumbed their noses at Wall Street's conventions, Google has used the stock market like an automated teller machine since its much-ballyhooed initial public offering in August 2004.

If the latest offering is priced near Google's current market value, the Mountain View, California-based company will have raised about US$7.5 billion from investors in the past 20 months. Google employees, led by co-founders Larry Page and Sergey Brin, also have personally pocketed billions of dollars by selling some of their shares.

Separately, Google said on Wednesday that it has ironed out the final details of its expanded alliance with America Online, clearing the way for the online search engine leader to invest US$1 billion in its biggest advertising partner.

The two companies signed a March 24 definitive agreement to seal a deal originally announced in December, according to Securities and Exchange Commission documents filed by Google.

The company will assume a 5 percent stake in Time Warner Inc's AOL in exchange for a US$1 billion investment expected to be made some time during the three months ending in June.

AOL also will get a US$300 million credit to advertise its products and services through Google's vast advertising network. Google, in turn, is depending on AOL to sell more graphical ads to help diversify its search engine beyond the text-based ads that generate most of the company's profits.

The deal also gives Google the right to demand that AOL be spun off as a publicly traded company beginning in mid-2008, according to previously filed SEC documents.
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