Alphabet's Google Capital Buys Majority Stake In Care.com

Alphabet Inc. (NASDAQ:GOOGL) owned Google’s investment arm Google Capital has decided to put faith and cash in to Care.com, Inc. (NYSE:CRCM) , the world’s largest online marketplace that connects caregivers with families.

In an official announcement made yesterday, Care.com stated that Google Capital has invested $46.35 million in the company.

The deal, which is Google’s first ever investment in a public limited company, makes it the largest shareholder in Care.com as well as in any other online market place.

Details of the Deal

As part of the agreement, Google Capital bought a newly issued series of convertible preferred stock at an initial conversion price of $10.50, representing a 21% premium to the 30-day average trading price of $8.68 as of Jun 27, 2016. The stock carries a 5.5% annual dividend for the first seven years and payable in kind.

Care.com also announced that it has used the proceeds from the sale to repurchase $30.5 million shares of its common stock from Matrix Partners at $8.25 per share, representing a 5% discount to the 30-day average trading price of $8.68 as of Jun 27, 2016.

Care.com declared the inclusion of Laela Sturdy, a partner at Google Capital, in its board. She is the one who led the investment.

Mutually Beneficial Partnership

Google has been a client of Care.com since 2011 and it is this long-term relationship that cemented the foundation for this investment.

Being a growth equity firm, Google Capital is particularly interested in “growth stage” businesses exploring expansion opportunities.

Impressed with the company’s service quality and growth potential, Sturdy initiated talks with Care.com founder and CEO, Shiela Lirio Marcelo, which eventually led to the investment.

With the investment, Google gets an entry into an important services segment that may be integrated into Google services sometime in the future.

Care.com, on the other hand, gets a monetary boost that will help it to expand. It will also be able to make the most of Google’s expertise to improve its services, thereby getting closer to its dream of building a global marketplace for care.

Marcelo has expressed optimism that Sturdy’s operating and investment experience will enhance Care.com’s offerings to corporate clients.

At present, Google has a Zacks Rank #3 (Hold). Some Zacks Rank #1 (Strong Buy) stocks in the wider technology sector worth considering include PetMed Express, Inc. (NASDAQ:PETS) , Exa Corp. (NASDAQ:EXA) and Paycom Software, Inc. (NYSE:PAYC) .