Google issues stock, closes on purchase of YouTube

November 15, 2006|By Bloomberg News

MOUNTAIN VIEW, Calif. -- Google Inc., the most-used Internet search engine, completed its $1.65 billion purchase of YouTube Inc. yesterday, adding a Web site where users watch more than 100 million videos a day.

Google said it issued about 3.22 million shares, and convertible securities representing 442,210 shares, in connection with the purchase.

The purchase is Google's largest and gives it a way to take a bigger share of the $410 million market in the United States for online video advertising. YouTube lets users post their own videos to its site, where anyone can watch them. Google said last week that buying YouTube might expose it to copyright lawsuits.

Shares of Google rose $8.27, or 1.7 percent, to close at $489.30 on the Nasdaq stock market. They've risen 18 percent this year.

About 12.5 percent of the Google shares will be held in escrow for a year "to secure certain indemnification obligations," the company said.

YouTube, launched in February 2005, was the most-visited video sharing site in the United States in October, with 30.4 million users, according to Nielsen--NetRatings, which tracks Web use. Google's own video site had 18 million visitors and MySpace.com's video site had 12.2 million, Nielsen said.

The acquisition is a windfall for venture capital firm Sequoia Capital, which had invested $11.5 million in YouTube over the past year, according to YouTube's Web site.

Google said the $1.65 billion payment was reduced by $15 million that Google provided to YouTube before the purchase closed.

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