Google Twists Open Stock Spigot

Google's(GOOG) highly anticipated secondary offering was priced late Wednesday at $295 a share, below its closing price of $303.

Google sold 14,159,265 shares directly to institutional investors (a number equal to pi minus the initial "3" -- apparently Google wanted to be clever, but not badly enough to sell 31,415,927 million shares). Institutional investors had been showing strong interest in the secondary shares.

The offering may prove to be another round in the clumsy tango Wall Street has been dancing with Google. During Google's IPO last summer, when it issued 19.6 million shares, big investors largely shunned the stock, driving the offering price down to $85, an embarrassing misstep when you consider that the stock is trading more than 3.5 times that price.

Now, as the deep pockets line up for a piece of the secondary offering, traders may be buying in when the stock is at risk of becoming dangerously diluted. In addition to the 14.2 million shares Google is selling in the offering, insiders have sold 15.2 million shares since the stock went public. That's on top of the $563 million worth of Google shares that Yahoo!(YHOO) sold in the second quarter.

All of this has made more and more shares available for trading, which may be just what Google wants. To qualify for entry into the S&P 500, a company's float -- the shares not held by insiders or purchased through buybacks -- must be at least 50% of its total outstanding shares. Before the offering, insiders alone held 53.4% of Google's stock; after it, that ratio falls to 51%.

Of course, intelligent money managers understand this, and they may in fact be betting that holding Google shares when it gets the green light to enter the S&P 500 will itself cause a pop in the stock price as index funds that mirror the S&P 500 seek out shares for their positions.