

Google share split is naked power grab - larrys
http://finance.yahoo.com/blogs/breakout/google-share-split-naked-power-grab-155808910.html

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Steko
Felix Salmon has a much better write up of why it's bad:

[http://blogs.reuters.com/felix-salmon/2012/04/13/googles-
evi...](http://blogs.reuters.com/felix-salmon/2012/04/13/googles-evil-stock-
split/)

Quoting at length:

 _Dual-class voting shares were illegal for most of the 20th Century, but came
back in 1986. James Sterngold’s NYT story on their reintroduction is well
worth a read, featuring as it does comments against the new rules from both
Felix Rohatyn (”The one-share, one-vote rule is pretty fundamental to the
market”) and T Boone Pickens (”Let’s face it, managements want this because
they want to entrench themselves. They went to Congress to get protection and
they didn’t get it. So they went to the exchange to get protection, and they
got it.”)

Even then, however, there were safeguards, including the crucial one that a
majority of independent shareholders — excluding management and some directors
— had to approve the move... Google has, now, clearly violated the spirit of
the NYSE rules, if not their letter. It took 15 months for the independent
directors on the board to be persuaded of this, in long and secret
deliberations_

~~~
anamax
> Dual-class voting shares were illegal for most of the 20th Century, but came
> back in 1986.

According to
[http://www.investopedia.com/articles/fundamental/04/092204.a...](http://www.investopedia.com/articles/fundamental/04/092204.asp#axzz1rxM5WWdB)
, Ford has dual-class and I'm pretty sure that it has had it long before 1986.
Of course, Ford may have had dual-class before the "most of the 20th century"
rules were written and may have been grandfathered.

FWIW, Berkshire-Hathaway (buffet's toy) has dual-class stock.

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ralfd
The NYTimes explained it differently. A shareholders voting right won't be cut
in half.

[http://www.nytimes.com/2012/04/12/business/whats-up-with-
goo...](http://www.nytimes.com/2012/04/12/business/whats-up-with-googles-plan-
to-split-its-stock.html)

> Investors typically have Class A stock now. They will be given an equal
> number of Class C shares, which won’t have any voting power. The value of
> the Class A stock will be split between the two, so if the stock is trading
> at $600 when it happens, a Class A share will be worth $300 and a Class C
> share will be worth $300. Investors will have twice the number of shares
> they held before, but the total voting power and stock value won’t change.
> So if Bob owns 100 shares worth $600 each, he will own 200 shares worth $300
> each. Bob will still have 100 votes, and the value of all his shares will
> still be $60,000.

What I don't get is why one shouldn't immediately sell non-voting C-shares and
buy voting-power A-shares back. Or only buy A-shares. Normally non-voting
shares will be compensated by a bigger dividend. But Google doesn't pay a
dividend (yet)?

~~~
sp332
I think there's some information missing. Voting shares are always worth more
than non-voting shares, for exactly the reason you mentioned.

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SatvikBeri
It certainly is a power grab, but that doesn't necessarily make it evil. Evil
would be deceptively creating some sort of financial instrument and masking
the fact that outside Shareholders will lose voting power. But creating new
shares which have no voting rights is a common move, and it seems like Google
is being pretty open about it.

~~~
sp332
It's tyranny of the majority shareholders. If you own 49% of Google's stock,
you don't have 49% of the power. You have 0 power because whatever Larry and
Sergey says, goes.

~~~
SatvikBeri
You're correct, and the reason I say this particular tyranny of the majority
is not evil is because Google has always explicitly stated that they never
intend to let their outside shareholders have any power over corporate
decisions. Same with Facebook...in fact, these companies have basically stated
that if they weren't legally required to have an IPO, they wouldn't.

If Google had ever claimed that they would listen to outside shareholders, or
even if they hadn't gone out of their way to state that they wouldn't, then
the power grab would be deceptive and evil.

~~~
helmut_hed
Google and Facebook were/are "legally required" to have IPOs? I believe they
are only required to release financial statements. Even if that were true,
though, claiming this is their sole reason to IPO strikes me as disingenuous,
given the improvement in liquidity it provided/will provide for the fortunes
of the company's insiders. Surely that played a significant role in their
decision-making.

~~~
SatvikBeri
A company is legally required to go public when it has more than 500
shareholders.

Google had significant cash reserves before going public and has never had a
period where they spent enough cash to go below what they received from the
IPO. Facebook is in a similar position of having tons of cash and nothing to
do with it.

Not to mention, both companies delayed their IPO as long as legally possible,
which strongly suggests that they wouldn't have filed if they could get away
with it.

That's not to say that there are no benefits from becoming a public company.
It makes life much better for the employees who received stock options (though
it doesn't provide as much of a benefit to, e.g., Larry Page and Sergey Brin).
But it's fair to say that neither Google nor Facebook were enthusiastic about
going public.

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Zikes
So, the founders of the company want to make sure they maintain control over
it?

Why is this evil again?

~~~
VengefulCynic
They're essentially reducing the value of the shares of stock. Each share of
Google stock has a value as a portion of the overall company and also includes
the right to vote in board elections and exercise voting rights on any measure
put to shareholders.

To simplify, let's say I own 10% of Google, what this stock split does is
leave me with a 10% ownership stake in Google, but only in possession of 5% of
the voting rights in a board election - effectively taking away half of my
oversight of the company by fiat.

~~~
evgen
Sounds like you should sell your GOOG shares then if you think this is a
problem. Yes, it is about maintaining power for the current cabal running the
company but they are being very open about this fact. If the value of the
shares will truly be diminished by the loss of voting rights then I expect the
market price of those shares to reflect this and now would be a good time to
sell.

~~~
asdfdsa1234
GOOG is down about 4% today.

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asdfdsa1234
Moves like this that consolidate power in the hands of large shareholders have
precedent. From what I've read, small shareholders tend to be poorly treated
under such arrangements, or so they claim. On the other hand, I like the out-
there projects. I want them to create self-driving cars, re-usable space
vehicles, strong AI, nanobots, and the rest, and as a shareholder I don't mind
losing some profit to take that chance. However, this assumes power isn't
abused over time, and without checks in place, one has to worry a bit.

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cpeterso
Will the price of new Class C shares (with a new ticker symbol) float
independent of GOOG stock price? It will be interesting to watch the price
difference between the shares.

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aneth
It's not a power grab so much as maintaining their current power. Without this
provision, the stock split would result in the founders' voting power being
cut in half, in which case they would of course elect not to split the stock.

If I misunderstand, please correct me. As I see it, instead of splitting 10x
voting stock held by the founders, they are issuing non-voting stock to
everyone.

I'm curious to know how they will differentiate between voting and non-voting
common shares in the stock market - it seems one is worth at least marginally
more than the other.

~~~
asdfdsa1234
If the stock is split, the founders' stock will also be split, and their share
of the whole will remain constant (assuming there is only one class of stock
in existence).

Listed companies have different tickers for each class of shares.

