Markets Google

Google created a corporate structure under a new holding company and moniker called Alphabet in 2015. But there are still two ticker symbols for Alphabet on the Nasdaq stock exchangeGOOGand GOOGLand very little price difference between the two. So, what gives?

The short answer is a stock split, but a longer answer is an attempt by the companys top shareholdersGoogle co-founders Sergey Brin and Larry Page, along with company chair Eric Schmidtto retain as much control of the company as possible. The two tickers represent two different share classes. The first group falls into the A-shares category (GOOGL), while the others are C-shares (GOOG).

In this article, we look at these two stocks and what they mean for their investors.

Class Inequities

Google split its stock in April 2014, which created the A- and C-share classes. Like any other one-for-one split, the number of shares doubled, and the price dropped in half. However, there is one crucial difference: The A-shares receive one vote, while the C-shares receive no votes. Anyone who held A-shares at the time of the split received an equal number of C-shares, but their voting power did not increase.

If youwant a vote at the shareholder meeting, buy the A-shares. They can trade at a slight premium, which shows that the market does place some value on voting power (although the C-shares sometimes trade at a higher price than the A-shares). See the difference in the chart below:

Google plans to continue issuing C-shares to finance acquisitions and reward employees, so its far from clear whether the market will price the C-shares at larger discounts in coming years or simply bake in the current difference at a few percentage points.

Special Considerations

There was one twist that came with owning the C-shares. In part to quiet some stockholders objections to the original split, Google promised to compensate C-class shareholders if the price of their shares fell more than 1% below those of A-shares a year after the split. While the difference isnt huge, it did exist.

What about the B-shares? Brin and Page owned some 44.6 million B-shares at the end of January 2015, but they announced a plan to sell some of those shares. In March2015, there were some 52 million B-shares outstanding, but U.S. Securities and Exchange Commission (SEC) filings showed thatBrin converted a total of 48,998 B-shares to A-shares toward the end of April 2015, to be sold over a period of time. This reduced his voting control of the company. B-shares are counted and valued as if they were converted to C-shares with the exception that B-shares have voting power, and C-shares do not.

The upshot is that Google allows investors to buy a very large share of its equitybut control of the company, not so much.Some investors are willing to accept that because Googlelike Apple (AAPL) and Meta (FB), formerly Facebookis very much a bet on its founders and executives. Other companies may be like that as well, but in Silicon Valley, its particularly salient because so many firms are based on one persons big idea.

Not every investor will be so sanguine, however. There are surely many who see some of Googles more out-there ventures, such as the investment in SpaceX and driverless cars, as a distraction from its core search and advertising business that drives the companys revenues and reputation.

The Bottom Line

Theres definitely a difference between the price of the two types of Google shares that you can buy, though it is relatively small. If you feel that voting at the stockholders meeting is important to you, aim for the A-shares.