Google founders Sergey Brin and Larry Page after the 2-for-1 stock split that will secure their control over the company.
Recently, the tech powerhouse Google stock split into 2–Class A (GOOGL) and Class C (GOOG). A main distinction between GOOGL and GOOG is voting rights. As you should know, common stock holders have voting rights on a company’s board. GOOGL stockholders will have voting rights while GOOG will not. For those who currently had held Google before the split (and I hope they had sold it before the split because after split, GOOG and GOOGL become around half of what it was before), one will receive twice as many shares as before. Basically, what getting twice as many means for founders Larry Page and Sergey Brin is that with twice as many stocks in circulation, each stock’s value (power) in the company dwindles. As a result, Larry Page and Sergey Brin can retain their power and control over the company. This concept is basically supply and demand. More stocks in circulation, each stock value decreases, and the converse suffices.
According to Stephen Diamond, a law professor at Santa Clara University, said that stock splits have become a common way for company stocks to be “more accessible to retail investors,” and also allows a board “to use the stock as currency to acquire other companies without shareholder approval,” because stock splits are approved by the board.
To update on how GOOG and GOOGL stocks are doing right now, they have not had the best of times. But as Charles Dickens wrote in A Tale of Two Cities, “It was the best of times, it was the worst of times.” In perspective, there is no company in the financial world that never only had the best or the worst of times.
And with the two founders, as of the last proxy filing this month, Page and Brin control 56% of Google, holding Class C stocks for each share of Class A stock and B stock–a super-vote class that only Page and Brin have.
Class A stocks entitle to one vote, Class B stocks entitle to ten votes, and Class C stocks have no vote. Here’s an example:
Let’s say you hold 1000 Class A shares right now. At one vote per share, that entitles you to 1000 votes. With this stock split, you now hold 1000 Class A and 1000 Class C shares. Class A shares keep their one vote, while Class C shares have none. So while your number of shares doubles to 2000, you still have 1000 votes. The same thing is happening for those holding super-voting Class B shares. And since it is much less likely Class A shares will be issued in the future, Brin and Page effectively put a floor under their voting control.
Now let’s just hope for any of you who hold GOOG or GOOGL stocks that NASDAQ and Google cooperate and do better in the future.