
Google splits into GOOG and GOOGL today - pixelcort
http://m1.marketwatch.com/articles/BL-MWTELLB-13314
======
therealarmen
This is meant do to one thing -- let the founders retain control while
allowing for large stock acquisitions. It's possible Google was muscled out of
the Whatsapp deal simply because they couldn't pony up the money. $20B is
almost half of their cash on hand. Note that the Nest and Waze acquisitions
(small in comparison) were paid for almost entirely in cash.

~~~
higherpurpose
Google wouldn't have paid $20 billion for Whatsapp, and the only reason
Facebook did is because their stock is very overvalued, and Zuckerberg knows
that, so he's taking advantage of it while he can. Google's stock isn't that
overvalued, if at all so they can't buy apps with $20 billion of what is
basically "play money".

~~~
declan
I think this is correct. The WSJ today had a piece offering much the same
analysis: that because Facebook's stock is (arguably) overvalued relative to
revenue and expected growth, investors are encouraging the company to do these
sorts of deals.

It's a perfectly logical outcome if you have high stock valuation and not as
much cash on hand.

------
donaldc
Bad news for Google shareholders in the long run. Companies with multiple
share classes having different voting rights tend to underperform companies
with stock that is one share, one vote.

Please note: that doesn't mean Google won't do well, but that on average it's
likely to do worse for shareholders than if all stock had the same voting
rights.

Since someone is sure to ask for a citation,
[http://irrcinstitute.org/news/multiclass-voting-companies-
un...](http://irrcinstitute.org/news/multiclass-voting-companies-underperform-
riskier_pr_10-02-2012.php) It's not the only study that has found this.

~~~
cbr
Note that Google already had this, with classes A and B having a 10x
difference in voting power.

Though if it's a bad thing for a company, having more of it probably makes
things worse.

~~~
donaldc
Exactly.

------
fiatmoney
"Ownership" without control gives you precisely nothing, except for perhaps
standing in a shareholder lawsuit. A company being unaccountable to its
investors should make it unattractive as an investment.

~~~
JumpCrisscross
> _" Ownership" without control gives you precisely nothing_

This statement implies non-voting stock is worthless. That is untrue. There
are people willing to pay good money for nonvoting stock.

Imagine a dual-class share company. Class B shares cannot vote. Class A shares
can vote - they own 100% of the vote share. But both classes are _pari passu_
in economic terms - if Class A gets a $1 dividend Class B must receive the
same. Further, let there be 1 Class A (voting) share and 999,999 Class B (non-
voting) shares. Would you believe those 999,999 non-voting shares are
worthless?

Both voting and non-voting stock take part in a company's cash flows - their
discounted cash flow value is identical. The only time the difference (or
"spread") matters is in the event of a proxy fight or takeover, i.e. a contest
of control. The spread is a function of the probability that your vote is
decisive - that absent your vote there would be a tie - in a meaningful
contest of control. Small odds, which is why voting-nonvoting spreads are
minor in the United States (I did a thesis on the subject - in Italy these
spreads are around 10%).

~~~
yid
Thank you, that was very clear.

> if Class A gets a $1 dividend Class B must receive the same.

Does this mean that companies cannot split into voting and non-voting stock
without paying out a dividend?

~~~
repsilat
You'd think so, but in practice it's the other way around. The decision to pay
a dividend is effectively made by the voting shareholders, and the voting
shareholders see paying a dividend as giving money away to the non-voting
shareholders.

~~~
gohrt
1\. GOOG's stock structure specifically guarantees equitable dividens and even
share price parity.

2\. Directly voting seizing the economic value of minority shareholders is
about the easiest deleliction-of-fiduciary-duty case to win.

------
Aqueous
"The much-awaited Google 2-for-1 stock split is finally happening on Wednesday
when shareholders of record as of March 27 will get two shares for every one
they owned."

Out of curiosity what happens if you bought shares on March 28th? Does your
stock price just go to $600 or can you petition Google to have the new Class C
shares issued to you to make up the loss in price?

~~~
jrockway
NASDAQ made the situation a little more complicated by reporting GOOG as the
price of the Class A share (soon to be GOOGL) _plus_ the price of the right to
have a Class C share distributed to you. My brokerage linked me to this FAQ:
[http://nasdaqtrader.com/content/GOOGfaqs.pdf](http://nasdaqtrader.com/content/GOOGfaqs.pdf)

~~~
greenyoda
To summarize the relevant part of this FAQ:

 _" On March 27, the Class C shares will commence trading on a WHEN ISSUED
basis (GOOCV). At that same time, the EX DISTRIBUTION WHEN ISSUED market for
the class A shares (GOOAV) would be made available. This market represents the
ability to trade the Class A stock without entitlement to the Class C
distribution.

From March 27 through April 2 we will be trading: Class A shares regular way,
with entitlement to the class C shares (GOOG); Class C shares when issued
(GOOCV); Class A shares on an EX Distribution, when issued basis (GOOAV)."_

So on the 28th, you would have a choice: If you bought shares of GOOG, you'd
pay the full price, and you'd be entitled to the stock distribution. If you
bought GOOAV or GOOCV, their prices would reflect the fact that you would not
be entitled to the stock distribution, which means you'd pay roughly half the
price of what you'd pay for GOOG.

------
steveplace
If you're in GOOG options, it's going to get goofy.

[http://www.cboeoptionshub.com/2014/03/28/goog-get-ready-
next...](http://www.cboeoptionshub.com/2014/03/28/goog-get-ready-next-weeks-
split/)

~~~
junto
Also, if you have a "stop loss" orders then I think it is worth cancelling
them. I'm not sure if they are smart enough to pick up on splits.

~~~
rohansingh
All stop orders are canceled in case of a split. They will need to be
replaced.

------
wtracy
Does this imply that GOOG and GOOGL shares will have prices that will move
independently going forward? This should be interesting to watch.

~~~
drcode
Yes, and Google has committed to pay an extra dividend if the prices diverge
too much, because laws.

~~~
gojomo
I can't find details on this... do you have a link? (I'm wondering what
conditions would trigger this 'extra dividend', and when.)

~~~
drcode
Sorry, can't find it, but one of the recent news stories on the split said
there would be a special dividend that kicks in after 2% divergence in price.

------
ksec
Is it only in the US where it is allowed for stock shares to have no voting
power?

Because I think this couldn't be done in HK or UK stock market.

~~~
solomatov
I traded in Russian stock exchange and many companies had "preferred" stocks
which didn't have voting rights. Usually, they are traded substantially lower
than "normal" stocks.

~~~
slowjoe
Preferred stock is actually a form of debt. It gets paid after the bond-
holders but before the shareholders.

It almost never carries voting rights.

------
ForHackernews
What if you hold Google shares as part of an index fund? Does the fund now
hold both GOOG and GOOGL?

~~~
jspaur
Yes (assuming the fund buys/holds all positions and hasn't taken an
optimization strategy)

This has some interesting side effects to things such as the S&P 500
([http://www.forbes.com/sites/investor/2014/04/02/google-
moves...](http://www.forbes.com/sites/investor/2014/04/02/google-moves-the-
market-introducing-the-sp-501/))

------
IgorPartola
Honest question: why do voting shares get traded at all? In most cases,
several specific people will have majority control and will either retain it
over time or deliberately give it to someone else. Sure, I can buy up a large
portion of the stock, but for the most part, never a majority. So why bother
trading voting stock at all? Or am I missing some power that a minority
stakeholder can have with, say, 10% ownership?

~~~
gohrt
Non-voting shares weren't generally accepted 15 years ago. Page+Brin were able
to secure 10%-voting shares for the IPO and employee RSUs. Now they have
stopped the creation/distribution of new tradable voting shares.

------
aareet
Do Google employees get Class A, B or C stock?

~~~
tmhedberg
Every existing class A or B share will be matched by a class C share. Most
Googlers had class A shares before, so now we'll have half class A and half
class C, i.e. twice as many total shares, with the same number of votes as
before.

------
herokusaki
Slightly off-topic but why don't more companies have 5 character ticker
symbols? They'd probably be easier to recognize.

~~~
adventured
Until the late 1990's there were SEC rules governing when you could have three
vs four or five letters.

You might not be surprised that the origination of the short naming convention
was heavily caused by the ticker tape machine (dramatically more convenient in
most respects to just enter a short symbol rather than the whole company
name).

------
kriro
I'm assuming they are also planning on buying back a chunk of the A-shares
(and will only issue C shares in the future)? Will be interesting how much the
price gap between A and C, or in other words the premium on control, will be.

------
bane
So does this mean we should expect some large-ish acquisitions in the near
future?

~~~
antonius
No. This essentially means there will be two classes of Google Stock (A and C)
with Class A stock having more voting power than Class C stock from a
shareholder prospective.

This dilution of shares essentially gives those with a large share of stock
options (like Brin & Page) more power.

 _Edit: As a user pointed out, Class B should be Class C_

~~~
cowsandmilk
(a) there already were two classes of shares, A and B. This creates a third
class C with no voting power (b) the argument in the article is that Google
would then issue class C shares for use in acquisitions. Brin & Page did not
want to issue more A shares, which would risk their majority control; but they
would be willing to issue C shares and use them to acquire companies as they
would have no dilutive effect on their majority control.

------
nodesocket
Better article:

[http://business.financialpost.com/2014/04/02/google-inc-
stoc...](http://business.financialpost.com/2014/04/02/google-inc-stock-
split/?__lsa=9c9b-84d9)

------
runamok
Anyone know the tax implications of this? I have seen splits before but
supposedly this was equivalent to a special dividend as the stock's value
halves.

------
raldi
If the Class C shares go to whoever held the stock on March 27, why didn't the
price drop by half at the open on the 28th?

~~~
jrockway
Because the "GOOG" you saw listed was not Google's Class A shares, but rather
the price of the Class A shares plus the right to receive a Class C share.

------
outside1234
tl;dr: Google is acting like an Asian company and pretending to be a
publically owned company while screwing shareholders out of voting rights.

~~~
gohrt
dividend shares are different from voting shares.

Apple juice is different from milk.

No one is getting screwed, they can buy what they want, or not.

------
lazyjones
Google buying Tesla soon ... Would be a shame though!

------
ilarym
So... this is an April Fool's joke, right?

~~~
notatoad
no. april fools was yesterday, and this has been extensively reported over the
last few months.

------
ajcarpy2005
There seems to be a push to diversify and expand Google's income recently.
Google Play Music All Access, Google Helpouts (20% cut), this stock change,
Google fiber (while competitively priced, I expect there will be long-term
profits), Google Glass, etc.

I have been noticing this and assume it's meant to help them fund their
robotic and autonomous car projects. These are likely capital-intensive
segments of the company.

~~~
jacques_chester
Google have been trying to find something apart from advertising since pretty
much day dot. It's a strategy pioneered by Microsoft, I call it "spaghetti
cannon". Turn your free cashflow into spaghetti, fire it at a wall, hope
something sticks.

It's sorta-kinda worked for MS. They have 4 or 5 distinct lines of business,
each of which could qualify as an F500 alone.

Google don't have that. They have 1, and only 1, line of business sustaining
every outlay they have. They've only _ever_ had 1, and only 1, line of
business, right back to their first public reports.

~~~
bane
I do wonder sometimes what Android could have meant to them if they had kept
it more close hold and made and sold their own devices.

Sure they got lots of other companies to do the expensive hardware R&D,
manufacture and marketing, but in the end, what's a multi-billion dollar
market in devices is still just a funnel into line-of-business #1.

~~~
72deluxe
Even when they work with external suppliers (and a few of them for some
reason) for items such as the Nexus devices, they still have failings such as
very flat shapes that are hard to hold comfortably without dropping and
smashing (like the older Nexus phones).

If they had attempted to do their own hardware, it would have been a
horrendously uphill battle against the phones in the market at the time (Apple
had tiny share, Nokia colossal).

Putting out the OS meant that hardware manufacturers could compete with
different features whilst still (theoretically) having a common OS that users
could mostly navigate around and app developers could write for. Contrast this
with Nokia at the time, where S40 etc. worked wildly differently on different
phones, with different JSRs supported by the J2ME runtimes on each phone, and
where they essentially competed with their own other Nokia phones for specs;
Nokia did a massive range of phones that were mostly the same but looked
different or had very mild changes - it was too much choice!

This way Google could carry on doing software and leave the hardware to
external companies that were used to doing hardware. I still have my TMobile
G1 though, for history's sake. Don't use it though - it practically has no RAM
left over after boot.

