Google Buying Microsoft/Yahoo, and TSO Holes

A fascinating internal Q&A transcript was released by GOOG in a financial filing today on the company’s transferable stock option (TSO) program. It is triggered by this comment from a Google official explaining why and when the program might be shut down temporarily:

What is material non-public information? That’s legal jargon for big secrets. For example, if Google decides it wants to buy Yahoo, that’s a really big deal. We wouldn’t want to disclose that to the world the first time Eric Schmidt comes to a handshake agreement with Terry Semel about it, because that could disrupt the negotiation process. That would be material non-public information. We can’t have the TSO program up when we’re doing something big like that. So we would have to shut down the TSO program without warning for everybody, even the Googlers that have no idea what is going on. We expect this won’t happen frequently, but it could happen.

That provoked the following smart question by a Google-er who gets the consequences of halting trading, even if internal trading:

Question: Coming back to the question, if we are only shutting down this program when there are big deals in the making, won’t shutting it down actually cause us harm because people would realize we are about to buy Microsoft?

Rolefson: First we hope that the public markets won’t find out about it. Google employees are required under contract not to disclose information like that to the public. Realistically we know that there might be leaks. We took that into consideration and decided that the program is a great program nonetheless.

Intriguing stuff. Could Google’s TSO be a way for brokerage firms to get an even more effective window into major upcoming Google moves? Possible, because imagining that a trading halt will stay secret is the triumph of hope ever experience.

[via Michelle @ Footnoted]


  1. I recognize that the examples cited in the correspondence were deliberately chosen for their unlikely nature, but I imagine that this is going to light a fire under the kind of eager beaver rumor bloggers who will insist that Google is “hiding in plain sight” and that this is all part of some cunning plan.