WILMINGTON, Delaware (Reuters) - Google Inc and its board were sued on Monday by a shareholder who wants to block the company’s stock split plan because it entrenches the Web search company’s co-founders Larry Page and Sergey Brin, according to court documents.
Google announced the surprise stock split plan earlier this month, in which shareholders would get one new share of non-voting “Class C” stock for each existing “Class A” share.
As a result, Google will be able to issue new shares for acquisitions and employee compensation without diluting the 56.3 percent voting stake enjoyed by Page and Brin or diminishing their “iron-clad grip” on Google, according to the complaint.
Google did not immediately respond to a request for comment.
The purported class action lawsuit by the Brockton Retirement Board accused the co-founders and Google’s board of breaching their fiduciary duty to the company’s shareholders.
Page and Brin “wish to retain this power, while selling off large amounts of their stockholdings, and reaping billions of dollars in proceeds,” said the complaint, which was filed in the Court of Chancery in Delaware, where Mountain View, California-based Google is incorporated.
The lawsuit said the stock split will essentially grant billions of dollars of equity to the co-founders for nothing.
The lawsuit also said the “special committee” of Google directors that approved the stock split did not seek a fairness opinion of its financial advisor and never extracted an agreement that the founders would continue working for the company.
The case is Brockton Retirement Board v Larry Page et al, Delaware Court of Chancery, No. 7469.
Reporting By Tom Hals; Editing by Richard Chang