AdMob, Google, and Taxes

My comment over at Niki’s blog:

As an aside, I don’t know why this being a stock sale is growing to be such a big deal in the media coverage. I’m reading all sorts of different opinions. For example, WSJ VC Dispatch seems to imply that AdMob is disadvantaged that it was a stock deal. But on Business Insider, Blodget says Google gave up some upside by doing a stock deal.

I’m not a tax accountant but here’s all that matters to me. Is Google’s stock price overvalued? If so, then Google will be motivated to use it’s shares to buy companies. And sellers should be motivated to do a cash deal. I believe AOL used their overpriced shares to acquire TimeWarner in the m&a debacle of the century.

Now let’s assume that Google’s share price is fine. The other thing that matter is taxes. In a cash deal, Google doesn’t pay any taxes but AdMob shareholders pay a boatload (cap gains) . In a stock exchange deal, nobody pays taxes. In my opinion, this was the biggest driver for motivating a stock deal.

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