Google created a corporate structure under a new holding company and moniker called Alphabet in 2015. But there are still two ticker symbols for Alphabet on the Nasdaq stock exchange—GOOG and GOOGL—and very little price difference between the two. So, what gives?
The short answer is a stock split, but a longer answer is an attempt by the company’s top shareholders—Google co-founders Sergey Brin and Larry Page, along with company chair Eric Schmidt—to retain as much control of the company as possible. The two tickers represent two different share classes. The first group falls into the A-shares category (GOOGL), while the others are C-shares (GOOG).
In this article, we look at these two stocks and what they mean for their investors.
Key Takeaways
- Google created a corporate structure under a new holding company called Alphabet in 2015.
- An April 2014 stock split created Google A- and C-shares under the ticker symbols GOOGL and GOOG, respectively.
- Shareholders of A-shares receive one vote, while investors who have C-shares receive no votes.
- Google promised to compensate C-class shareholders if their share prices fell more than 1% below A-shares a year after the split.
What’s the Difference Between GOOG and GOOGL?
Class Inequities
Google split its stock in April 2014, which created the A- and C-share classes. Like any other one-for-one split, the number of shares doubled, and the price dropped in half. However, there is one crucial difference: The A-shares receive one vote, while the C-shares receive no votes. Anyone who held A-shares at the time of the split received an equal number of C-shares, but their voting power did not increase.
If you want a vote at the shareholder meeting, buy the A-shares. They can trade at a slight premium, which shows that the market does place some value on voting power (although the C-shares sometimes trade at a higher price than the A-shares). See the difference in the chart below:
GOOG vs. GOOGL as of Nov. 19, 2021.
Google plans to continue issuing C-shares to finance acquisitions and reward employees, so it’s far from clear whether the market will price the C-shares at larger discounts in coming years or simply bake in the current difference at a few percentage points.
Google’s B-shares are owned by insiders and don’t trade on the public markets. The B-shares are owned by Brin, Page, Schmidt, and a few other directors. The B-shares are counted and valued based on if they were converted to class C-shares, with one exception. Unlike C-shares, shareholders of B-shares receive 10 votes.
Special Considerations
There was one twist that came with owning the C-shares. In part to quiet some stockholders’ objections to the original split, Google promised to compensate C-class shareholders if the price of their shares fell more than 1% below those of A-shares a year after the split. While the difference isn’t huge, it did exist.
What about the B-shares? Brin and Page owned some 44.6 million B-shares at the end of January 2015, but they announced a plan to sell some of those shares. In March 2015, there were some 52 million B-shares outstanding, but U.S. Securities and Exchange Commission (SEC) filings showed that Brin converted a total of 66,664 B-shares to A-shares toward the end of April 2015, to be sold over a period of time. This reduced his voting control of the company. B-shares are counted and valued as if they were converted to C-shares with the exception that B-shares have voting power, and C-shares do not.
The upshot is that Google allows investors to buy a very large share of its equity—but control of the company, not so much. Some investors are willing to accept that because Google—like Apple (AAPL) and Meta (FB), formerly Facebook—is very much a bet on its founders and executives. Other companies may be like that as well, but in Silicon Valley, it’s particularly salient because so many firms are based on one person’s big idea.
Not every investor will be so sanguine, however. There are surely many who see some of Google’s more out-there ventures, such as the investment in SpaceX and driverless cars, as a distraction from its core search and advertising business that drives the company’s revenues and reputation.
Why Does Alphabet Have 2 Share Classes That Trade in the Market?
There are two share classes to preserve ownership control by Google’s founders after the company was reorganized as Alphabet Inc.
How Much Is Google Worth?
As of March 2022, Alphabet’s market capitalization was $1.745 trillion, making it one of the world’s most valuable companies.
Have GOOG/GOOGL Shares Split?
Google shares had two stock splits in its history: March 27, 2014, and April 27, 2015. When there is a split, both classes of shares are affected in the same way.
Has Google Announced a New Stock Split?
On February 1, Google parent Alphabet announced its board had approved plans for a 20-for-1 stock split. Alphabet said as part of its fourth-quarter and year-end 2021 results statement that it will split Class A, Class B, and Class C shares of the stock, pending shareholder approval. Anyone who owns shares as of the close of business on July 1, 2022, will receive an additional 19 shares of the share class they own, as of July 15, 2022.
How Many Shares Are Outstanding for Each Share Class of Alphabet?
There are 315.64 million shares of GOOG and 300.76 million shares of GOOGL outstanding as of February 2022.
The Bottom Line
There’s definitely a difference between the price of the two types of Google shares that you can buy, though it is relatively small. If you feel that voting at the stockholders’ meeting is important to you, aim for the A-shares.
Source: finance.yahoo.com