After the reorganization of Google into Alphabet, its shares continued to trade on the NASDAQ stock exchange. Very often novice investors are surprised to learn that these shares have two exchange tickers – GOOGL and GOOGand get lost, not knowing which one to choose. This is not a typo, just stocks belong to different classes. What is the difference between these Google promotions?
Google stock classes
If you look at the stock chart of GOOGL and GOOG shares, it becomes clear that the difference in price between them is small. What then is the point of dividing them into some classes?
The division of the company’s shares into classes was carried out so that the co-founders of the company retain the greatest degree of control over it.
Google shares are divided into three classes:
- class A – these shares are traded under the ticker GOOGL;
- class B – these shares are not traded on the stock exchange and are in the hands of Google co-founders Sergey Brin and Larry Page, as well as the head of the company Eric Schmidt;
- class C – these shares are traded under the ticker GOOG.
What is the difference between Google shares of different classes?
As a result of the 1-to-1 split in 2014, the number of Alphabet shares doubled, and their price, respectively, halved. The shares obtained by splitting received a fundamental difference:
- class A shares (GOOGL) – one share = one vote;
- class B shares – one share = ten votes;
- class C shares (GOOG) – do not have the right to vote.
This means that the holders of class A shares, of which 298.3 million have been issued, have exactly the same number of votes, while the holders of class B shares, of which 47 million, have 470 million votes, which corresponds to 61%.
Due to the fact that GOOGL shares (class A) give the right to vote at shareholders’ meetings, their price on the market is always slightly higher than that of GOOG shares (class C). The exchange rate difference between them fluctuates, but it always exists.
Features of dividing Alphabet shares into classes
The number of Alphabet shares of different classes is not constant. Google plans to issue GOOG (Class C) shares to reward its employees.
The number of class B shares is not static either. Their holders periodically convert shares into classes traded on the stock exchange and sell them. For example, in 2015 Sergey Brin converted 48,998 Class B shares into Class A (GOOGL) shares for sale. Accordingly, the weight of his vote at shareholder meetings was proportionally reduced.
Ultimately, it doesn’t really make much difference to the average investor which Google stock to buy. If you do not plan to attend shareholders’ meetings and vote with your shares, then GOOG shares (class C) are suitable for investments. And if you have serious plans for the development of the Alphabet holding and you are eager to share them with the rest of the shareholders, then it is better to choose GOOGL shares (class A).