On April 3 Google (GOOG) finally split their stock, granting existing stockholders of Class A shares and Class B shares one share apiece of a new common class of shares, fittingly called Class C.
The reasons Google split their stock are extraordinary. You will not believe why, and it will likely bring you to tears.
Actually, the reasons amount to a pretty standard case of a giant company wanting to offer more shares to the public at a cheaper price without giving up too much control. See, the new Class C shares have no voting power. Existing Class A shares, which now trade under the ticker ($GOOGL), still have a proportional number of votes to shares. But Class B shares, which have 10 times the voting power of Class A, remain off-market and reserved for Google insiders. Thus, the split means Class B-owning Google higher-ups can now unload their Class C shares onto the public while pocketing large sums of cash, most notably about-to-be-even-mega-richer co-founders Sergey Brin and Larry Page.
But you really will not believe what happened the next day after the split. Simply put, it will renew your faith in humanity.
Actually, it has been a fairly mundane transition. After popping a few percent on much higher volume (as expected,) shares of both GOOG and GOOGL dropped 4 percent on April 4, correcting the prior day’s gains.
But honestly! You absolutely, positively will NOT believe what will happen over the coming weeks. It will most likely shatter your very concept of reality and make you rethink everything you thought was or ever will be possible
Actually, things are likely to go back to normal fairly soon. After a short transitory period, the stock will probably resume behaving like Google’s stock, always has: climbing slowly but steadily up the charts.
What will change going forward is how Brin and Page approach acquisitions form this point forward, as the Google co-founders no longer have to worry about diluting shares during takeovers. The stock split will also provide a cash injection into the already quite well-off company, setting the stage for Google to make a major play in 2014, probably one even more dramatic than their $3.2 billion purchase of Nest.
And that’s something you really can believe.
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