has finally completed its long-awaited 2-for-1 stock split. As a
result, one non-voting Class C share will be issued in lieu of
each Class A and Class B share. Class A shares carry a single
vote while non-trading Class B shares (held by founders Brin and
Page) carry 10 votes each. The Class A and Class C shares will
trade under the tickers
The move involves an increase in the number of shares
outstanding and adjusting the share price accordingly. This
lowers the price while keeping the underlying value of the
In Apr 2012, Google proposed the 2-for-1 stock split by
creating non-voting Class C shares. However, some shareholders
were unhappy about the terms of the stock split and took the
matter to court, following which Google agreed to two
concessions. The first restricted the founders from selling any
Class C shares unless they sold an equal number of Class B
shares. The second was an undertaking by Google to compensate
Class C shareholders for the difference in Class C and Class A
share prices during the first year of trading.
Accordingly, if there is a big price difference between Class
C and Class A shares, Google will pay up to $7.5 billion to cover
The principal reason for the stock split is to safeguard the
founders' control and make the shares more affordable. The
resultant increase in the number of shares would help Google with
employee compensation and major mergers and acquisitions.
In recent times, other companies have also announced stock
splits. These include
Westlake Chemical Corp.
), both of which announced a two-for-one stock split, and
The Andersons, Inc.
), which declared a three-for-two stock split.
We believe that Google's stock split news will add to
favorable market sentiment as most of the Class C investors
without a right to vote will get a chance to earn from Google's
success in the future. Following the news, the share price rose
2.74%. However, being part of the major indices, some volatility
in Google's share price may be expected.
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