Google stock split history: what you need to know

Google stock split history

The first thing to consider when looking at Google’s stock split history, is that the company has two classifications of publicly-traded stock. GOOGL shares are otherwise known as class A, and GOOG shares are otherwise known as class C.

Class A shares were the only ones which were publicly available until 3 April 2014, when Google issued a stock split to create the class C shares. The table below gives information about the effects of the split of class A stock to create the class C stock.

Google class A stock (GOOGL) splits

The split was to ensure that the founders, Larry Page and Sergey Brin, retained overall voting control of the company, while also reducing Google’s then share price by half. This was achieved by creating the new class C stock, which does not carry any voting rights at shareholder meetings.

This was controversial at the time because rather than simply issuing fresh stock, Google created a new classification of stock with reduced voting privileges. However, other companies such as Facebook (FB), Snap Inc. (SNAP) and Under Armour (UA) have since seen the benefits of preserving voting rights at the top level of company governance.

Another split happened on 27 April 2015, and it only applied to class C stock. Rather than a stock split in the traditional sense, it was a form of compensation which awarded 2.7455 shares for every 1000 already owned by an investor. This was done on the assumption that class C stock would trade at a discount to class A due to its lack of voting power, which is explained in greater detail later in this article.

Google class C stock (GOOG) splits

Aside from class A and C shares, there are also Google class B shares which are owned by a handful of directors and the two founders. Class B shares have ten-times the voting power of class A stock and owners of class B shares also received one class C share for every class B share they held at the time of the first split on 3 April 2014.

Google stock split example

For an example of the Google stock split on 3 April 2014, let’s assume that a trader owned 1000 Google shares before the split. After the split, they would now own 1000 shares of Google class A, as well as 998 shares of Google class C, since the split was 1998/1000.

As of 31 January 2019, there were 299,360,029 shares of class A stock outstanding, 46,535,019 shares of class B stock outstanding and 349,291,348 class C shares outstanding.¹

Despite the relatively low number of class B shares in circulation, these shares have 465,350,190 votes thanks to their ten-times voting power. This is a huge increase on the publicly-available class A stocks, which only carry 299,360,029 votes.

The table below details the total ownership and voting power of chief executives and directors at Google and Alphabet. Since class C shares hold no voting power, they haven’t been included.

^{*Indicates the voting power is less than 1%}

Google stock classes: what do they mean?

There are currently three classes of Google stock: A, B and C. Each of these different classes is explained in greater detail below.

Google stock class A

Google class A (GOOGL) shares have consistently traded at a premium compared to their class C counterparts. This is because the market assigns a value to the voting power that an investor will receive if they buy class A stock.

The premium is usually between 1%-5%, for class A, but the two classifications of publicly-traded Google stocks generally move in close tandem.

For example, between January 2018 and January 2019, the closing price of class A stock ranged from $984.66 per share to $1285.50 per share. In contrast, the closing price of Google class C stock ranged from $976.21 to $1268.32 per share.

While they do not grant as much voting power as class B shares, owning class A shares is the only way that an average investor or a Google outsider will be able to vote on decisions at stockholder meetings.

Google stock class B

Class B shares are held by insiders, directors and the founders at Alphabet and Google. The majority of this classification of Google stock is owned by Larry Page and Sergey Brin, with a smaller amount being held by former Google chief executive officer (CEO) Eric E. Schmidt, independent director L. John Doerr and senior vice-president and chief legal officer David C. Drummond.

Many argue that investing in Alphabet, just like with many Silicon Valley companies, is an investment in the leadership and the founders more than anything. As a result, by maintaining majority voting control of their company, Page and Brin ensure that investor confidence in their company remains high, so long as they both remain at the helm.

Google stock class C

Google class C (GOOGL) were created following the first stock split in April 2014, and ownership of these shares grant no voting privileges at shareholder meetings. Google stock class C trades at a slight discount to its class A counterpart, but the two prices often move in correlation.

Since its creation, Google stock class C has been ‘split’ once. As previously mentioned, this was not a stock split in the traditional sense. Instead, it was a form of compensating investors in class C shares on the assumption that they would trade at a slight discount to class A shares.

This compensation, in the form of 2.7455 shares for every 1000 class C shares that an investor held, was granted if the stock price of class C and A differed by more than 1% in the first year. Ever since this first year, class C shareholders have not been compensated for any deviations in price.

The creation of class C shares also enabled Google to offer stock incentives to employees and executive officers, and revenue raised by selling the shares has facilitated acquisitions without requiring Page or Brin to give up majority control of their company.

Will Google stock split again?

Many investors are currently speculating over whether Google will stock split again. For one, 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.

Larry Page and Sergey Brin have stated, however, that they aren’t concerned by this and that they prefer their investors to have a long-term interest in Google’s vision rather than those investors and traders seeking to make a quick profit from Google stock.

Since Page and Brin hold a majority of the voting share between them, any future stock 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 the board. If their previous voting record is anything to go on, this seems unlikely at present.

Disclaimer: for the purpose of this article, since all splits took place before the formation of Alphabet Inc., we have referred to the stock splits as ‘Google’ stock splits, rather than stock splits of Alphabet.

Footnotes

¹ United States Securities and Exchange Commission, 2018
² United States Securities and Exchange Commission, 2019