What Eric Schmidt Meant When He Said Google Wasn't Holding $500 Million From YouTube For Lawsuits: We're Holding $200 Million

from the semantics dept

Remember the rumor, kicked off by Mark Cuban, that Google was holding back $500 million from YouTube in escrow to deal with potential copyright infringement lawsuits? Yes, the same claim that Google CEO Eric Schmidt clearly denied was true last week. Well, it seems that when he called it false, it appears he only meant the number, not the concept. Today it came out that Google has actually put aside a little over $200 million in an escrow account, almost exactly as the original email Mark Cuban posted described. It’s to handle potential legal costs associated with copyright lawsuits. While it’s not nearly as much of the deal as originally suggested, it still is a significant chunk. There’s a second interesting tidbit in the article as well. While some had suggested that YouTube actually has been profitable, apparently, the company was so hard up for money, it needed to borrow $15 million between the time the deal was announced just over a month ago and its closing of the deal yesterday.

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Comments on “What Eric Schmidt Meant When He Said Google Wasn't Holding $500 Million From YouTube For Lawsuits: We're Holding $200 Million”

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Mark Fletcher (profile) says:

Escrow in acquisitions

In my experience, it’s common place for a percentage of the acquisition price to be held in escrow for a period of time after the close. For both acquisitions I was a part of, the escrow amount was 10% of the acquisition price, held for a year. If I’m doing my math correctly, $200M is around 12% of the acquisition price, which seems somewhat ordinary.

Making Sense of the Youtube Acquisition says:

Cash strapped but still worth 1.65B?

If Youtube was struggling for cash why would Google pay 1.65B? They could have negotiated their way to a much smaller sum, couldn’t they? When you are desperate for cash you can still sell yourself for $1.65B? Its doesn’t add up.

There was an article in the Mercury http://www.mercurynews.com/mld/mercurynews/business/15919012.htm
where the folks at Fox said that they were not approached by Youtube for a possible acquisition. If you are cash strapped wouldn’t you approach all and sundry for a purchase?

The Youtube acquisition was a BIG thank you from the Google guys to Sequoia?

John says:

I know nothing either, but..

If there is a bubble and you have overinflated stock but also profits, you would want to use this (your stock) to make acquisitions. Ideally the acquisition target is also over priced and hopefully worthless. Then when the stock market crashes you can “write off” the acquisition and set it against your huge tax bill. So you can pay your (cash) tax bill with last years overinflated stock.

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