Why Are There Two Different Shares of Google Stock?

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Why Are There Two Different Shares of Google Stock?

If you’re looking for the answer to the question “why are there two different shares of Google stock?”, you’ve come to the right place! These are known as “Class A” and “Class C” shares. In the case of Google (now Alphabet, Inc.), Class A is referred to as GOOGL, while Class C is referred to as GOOG.

But, what exactly does this mean? And why are there two different kinds of shares for one company?

In this article, we’ll look at why there are two classes of Google stock and discuss how each type affects investors who choose to buy either.

Google’s Dual-Stock Structure

The division between Class A, B, and C stocks was established shortly after Google’s 2004 initial public offering (IPO). Google wanted to keep voting control over the company despite selling shares on public markets.

As a result, they split their stock into three different classes: Class C, which had no voting rights, and Classes A and B, which each had one vote per share but different ownership structures allowing founders Sergey Brin and Larry Page to maintain around 50% ownership despite their publicly available stake shrinking over time.

Control Through Dual-Share Structure

Today, that may seem like an outlandish way to hold onto voting power, given how common single-share voting structures have become among major tech firms such as Apple and Microsoft. When first adopted in 2004, it gave shareholders worried about the IPO process more assurance that individual holders wouldn’t end up completely losing control.

In addition, founder shares aren’t subject to dilution with subsequent issuances or acquisitions like typical public offerings would be. It reassured investors that companies employing such a structure were taking steps toward long-term stability under foundational leadership.

Why Companies Use Multiple Share Classes

Companies use multiple share classes to provide different levels of voting rights and ownership control. This allows companies to maintain control over their operations while still offering shares to the public. For example, Class A shares may have one vote per share, while Class B shares may have multiple voting rights.

This allows the company’s founders or executives to maintain majority ownership and control even if their publicly available stake reduces over time. This structure also helps to protect the company from hostile takeovers, as the majority shareholders can vote against any proposed changes.

Google is one of the most well-known companies to use multiple share classes, and its use is not unique. Many other large companies, such as Meta Platforms (META) and Berkshire Hathaway (BRKA, BRKB), also use multiple share classes to provide different levels of voting rights and ownership control.

Google’s Stock Split Explained

On March 27, 2014, Google (now Alphabet, Inc.) announced a stock split that created two new classes of common shares: Class A, which had one vote per share, and Class C, with no voting rights. This move ensured that Google co-founders Larry Page and Sergey Brin would remain the majority owners of the company while allowing them to pursue other ventures.

As part of the split, each existing shareholder on the date of record (March 27, 2014) received one Class C share for every already owned Class A share, with a payment date of April 2, 2014. This allowed shareholders to maintain their investment levels in Google without giving up control.

By creating two classes of common shares with different voting rights, Google ensured that Page and Brin could continue as majority owners without diluting their total voting power by further issuing additional shares and diluting current ownership levels.

Google’s two classes of stock, Class A and Class C, generate the same revenue and profits. This means that investors who own either class of stock will benefit from the same level of returns.

Google Class Structures

Google shares are categorized into three classes:

  • Class A (GOOGL): also known as common shares, held by a regular investor with regular voting rights
  • Class B: 10x the voting power of Class A shares held by the founders
  • Class C (GOOG): employees and some Class A stockholders with no voting rights

Class A vs. Class B vs. Class C Explained

Class A shares have one vote per share, while Class C shares receive no voting rights in shareholder meetings but trade at a higher price than Class A shares. All of Google’s new public offerings are also made up of Class C non-voting stock, so all shareholders that bought Google stock after its public offering own only Class C shares.

Furthermore, owners of Class A stock cannot convert their stock to Class C, and those with Class C cannot convert them to Class A.

Class A Google stock is owned by many large investors such as Alphabet, Google’s parent company, and institutional and individual investors who purchased their stocks during or before its IPO in 2004. With each share carrying one vote, this gives these large investors who control most of the Class A common stock significant voting power in corporate matters.

On the other hand, owning a majority of Google’s publicly traded class C non-voting shares gives an investor financial gain and no decision-making power in shareholder meetings since they do not carry any voting privileges.

Alphabet has a special class of B shares restricted to certain insiders and cannot be bought or sold on the stock market. Therefore, the B shares are held by Sergey Brin, Larry Page, Eric Schmidt, and other directors. In contrast to A shares, which give their holders one vote per share, B shareholders gain ten votes each.

alphabet google stock GOOGL
Google offers 3 classes of shares, but only two are available to the public.

Google Classes: Comparison Table

Class A (GOOGL)Class BClass C (GOOG)
Who Can Own It?Held by the publicHeld by Insiders/PromotersHeld by Promoters and the public
Public OfferingIssued at IPONever been issued to the publicIssued in 2014 after the stock split, with 1 for every Class A
Stock ListingListed on the stock exchangeUnlistedListed on the stock exchange
Voting?1 vote10 votesNone
Rights and ControlChange in voting rights if soldEnsures Insiders remain in controlNo change in voting rights if sold

Portfolio Diversification

The two different classes of Google stock can also benefit investors looking to diversify their portfolios. By owning both Class A and Class C shares, investors can ensure they are not overly exposed to any particular sector or company. This can help them spread their risk and maximize their returns over the long term.

In addition, having two different classes of stock allows Google to raise capital more easily, as it can issue new shares to the public without diluting existing shareholders.

Can You Buy Shares of Both Classes of Stock?

Yes, you can buy shares of both classes of Google stock. By owning a combination of Class A and Class C shares, investors can benefit from the voting rights associated with Class A shares and the higher price associated with Class C shares. Additionally, investors can gain financial gain without any decision-making power by owning most of the publicly traded class C non-voting shares.

Which Should You Buy?

When deciding which class of Google stock to buy, it is important to consider your individual investment goals. Class A shares are ideal for investors who are looking for a steady stream of income from their investments and want to have voting rights in corporate decisions. On the other hand, Class C shares may be more suitable for investors looking to benefit from the stock’s appreciation without having to vote. Ultimately, the decision of which class of Google stock to buy should be based on your individual investment goals and risk tolerance.

Wrapping Up

Google’s two-class share structure allows the company to maintain control over its operations while still offering shares to the public.

By creating two classes of common shares with different voting rights, Google ensured that Page and Brin could remain majority owners without diluting their total voting power by further issuing additional shares and diluting current ownership levels.

The two-class share structure also allows Google to offer investors more options when investing in the company. Class A shares are typically more expensive than Class C, but they also offer investors the chance to participate in any potential upside from the company’s growth. On the other hand, Class C shares may be a better option for investors looking for a more conservative approach to investing in Google.

Frequently Asked Questions

What's the difference between Google A and C shares?

GOOGL’s shareholders have the right to vote on corporate issues because it is a Class A common stock. GOOG is Class C stock and does not grant voting privileges.

Is GOOGL or GOOG more liquid?

With average daily transaction volumes of 1.6 million and 1.4 million, GOOGL shares are marginally more liquid than GOOG shares.

Does Google pay dividends?

No, Google does not pay dividends.

Can I convert from Class C to Class A shares or the other way around?

Shares cannot be converted or exchanged. Class C shares would need to be sold before Class A shares could be purchased.

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