Google runs into problems from having too much money in the bank

So much it might have to become a mutual fund

25 August 2006 16:42 GMT / By Stuart Miles

Google seems to be in the situation every company would love to be in - its got too much money.

According to Bloomberg.com, the search engine giant has got so much cash in investments that according to the SEC rules in America, it should be classed as a mutual fund rather than a company.

"Companies whose securities comprise more than 40% of their assets can fall under restrictions that govern the mutual fund industry. So Google, which has increased its cash and securities to almost $10 billion since its 2004 initial public offering, asked the US Securities and Exchange Commission late last month for an exemption", the article reports.

Google's $10 billion would make it a mid-sized mutual fund. The largest is the $142 billion Growth Fund of America, run by Capital Group Cos. in Los Angeles.

It would be "extremely onerous" for a company whose main business involves anything other than managing money to be regulated as a mutual fund, said Kenneth Berman, a former associate director in the SEC's investment management division to Bloomberg.

The SEC will provide an exemption to companies that can show their primary business is other than investing, owning and trading securities. Google's application said the company's internet, advertising and new media operations accounted for 92% of net income in 2005.

Only three of the company's 9700 employees are involved in "cash management", it said in the application. Google has hired outside money managers to invest its cash.

The 40% threshold is normally less of an issue for industrial companies that have factories and real estate, however Google, like other internet companies, doesn't have large factories or real estate. Their software engineers and other employees, don't show up in financial statements.

Via Bloomberg.com