Sunday, March 30, 2014
Google's Class C Stock
Google shareholders of record as of March 27 will be the recipients of a 2-for-1 stock split effective April 3rd. So, on April 3rd, we would expect that Google's stock price will drop by one-half as the number of shares outstanding doubles. What makes this stock split unusual is that instead of simply doubling the number of shares held by each shareholder, Google is issuing non-voting Class C stock that will be paid to shareholders. Google currently has dual voting shares of stock. The Class B shares, held by founders Larry Page and Sergey Brin, have 10 votes each and control 56 percent of the votes, while Class A shares have 1 vote each. There are two unusual concessions with this stock split that have arisen because of a shareholder lawsuit. First, Page and Brin would have to sell an equal number of Class B shares if they sell any of their Class C shares. Secondly, Google must reimburse shareholders if the price of the Class C shares diverges from the Class A shares during the first year. Often, dual class shares sell at different prices, with the difference in the share prices representing the value of a vote.