Google stock split: Will some shares be more equal than others?

Google went through with a long-delayed stock split on Thursday, and investors may be pleased to note that the company’s share price is up – although some shares are up a little more than others.

It’s a little confusing, because it’s part of a complicated plan Google adopted last year, aimed at cementing the control that cofounders Larry Page and Sergey Brin have over the giant Internet company. Brin and Page together hold about 56 percent of shareholder voting rights in Google, because they hold special “super-voting” Class B shares that carry ten votes each, while holders of regularly traded Class A shares got one vote for each share.

But as the company gradually issued more Class A shares over time, to raise money or reward employees with stock grants, the founders saw their voting power erode slightly. So they decided to create a third kind of share, which has monetary value but no voting rights. When Google issues  more shares in the future, they will be of the new Class C variety.

More immediately, the plan essentially split the value of the old shares, with Google granting to each investor one new Class C share for every share of A or B stock they already had.

Yeah, we told you it was confusing.

The net result is that Google shares, which closed above $1,135 on Wednesday, are now trading at roughly half that price today. But since every shareholder now holds twice as many shares (their old shares plus their shiny new Class C shares) they weren’t supposed to lose money on the deal.

In fact, both classes of publicly traded shares rose Thursday – by almost 3 percent in early trading, before settling down a bit later in the day. Some analysts suggested that’s because more small investors can now afford to buy into the high-flying company at the lower individual share price.

But the old Class A voting shares, which now trade under the new ticker symbol GOOGL, are up about a dollar more than the new, non-voting Class C shares, which trade under the old ticker symbol GOOG. So apparently some investors think the voting rights are worth something.

Google has promised that if the gap between the two classes gets too wide, it will compensate longtime shareholders, under a formula negotiated as part of a legal settlement with a group of shareholders who objected to the plan last year.

(Image of Page, Brin and Google executive chairman Eric Schmidt courtesy of Google)





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  • Mark Pugner

    Investing with the devil, awesome!