As part of yesterday’s bouquet of announcements, was an announcement by Google (GOOG) regarding its unique stock split; one that will leave investors with two different kinds of shares, adding a ‘Class-C’ share to a palette that consists of Class-A shares and Class-B shares. While Class-A shares come with 1 voting right per share and are currently held by the average investor Class-B shares are held by the management, which entitle them to 10 votes per share.
Currently all investors hold Class A shares which go by the ticker GOOG. Come April 2nd 2014, each holder of a Class A share will own one Class A share with 1 voting right and one Class C share with no voting rights. Class-A shares that are currently in circulation will be listed separately, and will trade by the ticker GOOGL, while the newly created Class-C shares will trade using the current ticker GOOG. What confusion!!
While a section of market voices is cheering the fact that the shares, currently priced at above $1,100 per share will become more affordable (in a conventional stock split the share price is halved), the move also allows Google’s management, the flexibility to issue these Class C shares in the future as ESOPs or during acquisitions without diluting their voting/controlling rights.
Further, should any of them decide to lighten their bag of shares, again, out come the Class C shares, and it’s even better that it won’t come at the cost of voting rights, and more importantly, control. Given that the management already holds about 15% of the company’s shares which account for more than 50% of the voting rights/control, this might be just a tad bit uncomfortable for the investors that like to get involved and get a word in. While it may not be something that should perturb the average investor, as far as the Google management is concerned, it’s the proverbial cake that they will, both have and eat.
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