Will Google Stock Split Again? (NASDAQ: GOOG)

Many investors are speculating about whether Google will stock split again. The current share price makes the stocks inaccessible to certain investors, particularly those who trade part-time or do not have a lot of capital. Page and Brin hold a majority of the voting share between them. However, any future split or increase in voting power for shareholders will have to be approved by both of the founders in order for it to pass through. If their previous voting record is anything to go on, this seems unlikely at present.

Google is a US-based company that specializes in multinational information technology, with its origins in Stanford University and subsequent emergence. It was founded by Larry Page and Sergey Brin. Google’s second-most important asset is the “Algorithm” which is a set of mathematical instructions developed by engineers that combine to evaluate what content users are likely to find most relevant for a particular search query. The Algorithms handle 90% of all searches on Google which are translated into 43 languages.

Google stock split
Google stock split

Will Google Stock Split Again?

The short answer is that Alphabet Inc’s (Google) stock will not split anytime soon.  A Google stock split is unlikely because investors are now used to stocks having high share prices and there is no reason for it to split. In addition, there has been no indication by Google’s leadership that they had plans for a Google stock split.

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Stock splits used to be very common, but haven’t in recent years. Amazon stock split very early but hasn’t since then. Google has gone down the same route, carrying out a stock split that set new precedence while according to insiders and management full control.

A stock split is a common phenomenon in the stock market, whereby public companies split existing shares into multiple shares, all in the effort of boosting liquidity. While a split always increases the number of shares in distribution, the total value often remains the same. It doesn’t dilute the voting power but cuts the share price. For many investors, the reduced stock price could make it slightly more attractive.

Google Stock Split History

Many investors have asked if Google stock has split in the past. The short answer is that Google stock is split 2 times. The first one took place on March 27, 2014, and the second Google stock split took place on April 27, 2015. Google shares are otherwise known as class A, and GOOG shares are class C. Class A shares were the only ones that were publicly available until 3 April 2014, when Google issued a stock split to create class B.

How to Buy Google Stock If You Don’t have $1000s

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If you are just starting out and want to buy Google Stock (GOOG) but don’t have the $1400+ dollars or want to diversify your holdings, then you should consider buying it using fractional shares. A good broker that offers free trading and fractional shares is M1 Finance.

Google Stock Split Approval

While Google did first announce a move to carry out a stock split in 2012, it did not materialize immediately. Shareholders rejected the push on concerns that the split’s unique structure would benefit insiders and not them.

A bone of contention cycled around how the tech giant intended to create multiple classes of shares. Instead of doubling the shares as is the case with a normal stock split, the tech giant opted to create a brand new class of shares. The new shares, Class C, were to be distributed for each share of Class A that a shareholder-owned. Insiders owning Class B were also entitled to Class C shares.

Multiple Share Structure For Google Stock

The stand-off emanated from the fact that Class C shares did not entitle holders to voting rights. With these structure insiders owning the Class C shares could sell their holdings and still not dilute their holdings in terms of voting rights, by virtue of owning Class A. Normal shareholders, on the other hand, owned shares that did not entitle them to participate in any decision making in the company.

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Pension funds and institutional investors went to court, arguing that the stock split structure favored insiders and not public shareholders. After months of litigation, an agreement was reached between the company and shareholders, resulting in a split in 2013.

Compensation For Disparity

The settlement provided owners of Class C shares with compensation whenever the shares traded at a discount of more than 1% from Class A shares within the first year of trading. During the first year after the split, Class C shares traded with an average discount of between 1% and 2%. Class C shareholders ended up getting small payments as compensation for the disparity arising from the split.

In recent years the disparity has been far much greater at times, amounting to more than $30 a share or more than 5%. Amidst bigger than expected disparity, there has also been a time when the disparity has narrowed to between 1% and 2%.

While Google’s Class A shares do come with voting rights at times, they are meaningless given that each share wields an extra ten votes. Class B Shares account for the biggest share when it comes to voting rights, which sees the holders control the decision-making process within the company. Conversely, Class B shareholders, often referred to as insiders will continue to maintain control over Google’s affairs as long as the insiders don’t sell them.

Google Set The New Norm For Stock Share Classes

While Google set precedence on stock split should go through, its unique model has become the new norm in the market. Facebook has already hinted at the possibility of turning to this kind of stock ownership structure should it ever decide to carry out a stock split. Some companies have opted for multiple classes of shares, all in the effort of ensuring management maintains the right to control.

Multiple classes of shares work best in companies with a proven track record of growth. In this case, management would be justified to opt for such structures all in the effort of retaining control that ensures they can do whatever they see fit, as long as it can accelerate underlying growth.

Alphabet is a perfect example of a company with multiple classes of shares that has grown to become a juggernaut within the tech space.

 

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