Google Plans To Split Shares 2-for-1

http://www.forbes.com/sites/ericsavitz/2012/04/12/google-q1-revs-in-line-eps-edges-street-sets-odd-2-for-1-split/

by diogenescynic • 14 years ago

59 70 14 years ago

Maven911• 14 years ago

I applaud them for making sure their own ownership of the company is not diluted, which is something I wish more founders were able to demand when they seek financing.

On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right.

davidw3• 14 years ago

> On the other hand, to me it seems like the main goal is to be able to provide RSUs and stock grants to employees without the right to vote, which I think is not right.

Well, it doesn't sound very good to me either, but luckily, a great many of their employees are extremely highly skilled individuals who can easily find work with other employers, should they not like the conditions.

dpark17• 14 years ago

Obviously employee mobility means an employer can do nothing wrong...

gregable• 14 years ago

Assuming the price difference is small, an employee could sell their C share on the market and immediately buy an A share.

Drbble2• 14 years ago

But there is going to be very little selling in voting shares. People will prefer to sell their nonvoting shares first.

mason55• 14 years ago

The new shares will be non-voting and trade under a new symbol. Sergey and Larry will be required to sell voting shares when then sell.

bobz• 14 years ago

I think this makes a lot of sense. I believe the company is better tightly held, but this will allow them to do "start-upy" things like continuing to grant large equity bonuses without diluting the company control.

I'm curious to see how much those voting rights will end up being worth. Assuming the two classes have the same payout "precedence" and receive the same dividends, any share price difference will be attributable to that voting right. (Probably not worth very much I would imagine, but someone could speculate that they will be more valuable in the future where a takeover was possible).

dpark17• 14 years ago

> and receive the same dividends

Yeah, they'll probably be the same there, at $0/year.

I think there will be a slight skew toward the voting shares, but probably not a lot, since a vote at GOOG doesn't presently do anything.

jimmyvanhalen5• 14 years ago

On a related note:

I really think analysts aren't looking at Google's income statement properly. I don't think Google is doing some kind of financial engineering, but their numbers doesn't look that great if you look closely:

1st Q 2011 GAAP net income $2.3B (adjusted to $1.8B after DOJ investigation, we'll use $2.3B anyway).

1st Q 2012 GAAP net income $2.89B

~$600 Million increase in GAAP net income.

BUT WAIT

1st Q 2012 Traffic acquisition cost totaled $2.51 billion

1st Q 2011 Traffic acquisition cost totaled $2.04 billion

~$500 Million increase in TAC

Google had to spend an additional $500 Million to earn an additional $600 Million net income. And it's the same thing if you compare other quarters YOY. The increase in TAC is almost equal to the amount of increase in net income. It's easier for Google to just withdraw money from it's own bank account and deposit it to another one and call it "net income". ;) jk

jcampbell15• 14 years ago

It doesn't matter what the dividends are today. A rational stock valuation is the NPV of all future dividends. There must be a guarantee that dividends will be paid equally, otherwise there would be no rational way to price the class C stock.

In short, the class C stock must have identical dividends to the other classes.

sukuriant3• 14 years ago

Wait, I'm a bit confused. Does this mean that I'm going to have X shares in GOOG and X shares in $newSymbol, and val(X)*2 = former stock price for GOOG? Or, will I retain X shares in GOOG and this new option will exist that will probably reduce the worth of my X shares.

Obvious disclaimer: I have stock in GOOG

dpark17• 14 years ago

If you have X shares of GOOG worth $Y, then after the split you'll have X shares of GOOG and X shares of GO2 (incidentally, this would be a cool ticker if they could get it). Your X shares of GOOG and X shares of GO2 would theoretically be worth $Y/2 each, but more likely, the value will be skewed slightly toward GOOG shares being higher.

The actual price of your shares will be determined by the market, but you can expect that the total value of your stock should be fairly comparable after the split.

chocolatebunny• 14 years ago

That sucks. Isn't GO2 considered harmful?

sukuriant3• 14 years ago

Awesome. Thanks for the clarification :)

soupboy• 14 years ago

Not sure if tickers can have numbers

Edit: Doesn't seem to be an official rule, but the de facto standard does appear to be 2-3-4-5 character tickers.[1]

[1] http://www.sec.gov/news/press/2007/2007-63.htm

loverobots• 14 years ago

dpark, other than maybe voting rights, isn't it the same as if Google doubled their Goog shares?

mfringel• 14 years ago

So Google admits that their current common shares are nominally non-voting by creating additional common shares that are actually non-voting.

As long as they don't pull a Yahoo, that should work out for them.

yay_cloud• 14 years ago

I think it's important for people to realize that this is NOT a dividend scenario. No GOOG investor will gain value because of this transaction -- in fact, each GOOG investor will lose value (voting power) because of this transaction.

fletchowns• 14 years ago

each GOOG investor will lose value (voting power) because of this transaction

Even though these new shares are non-voting shares?

dpark17• 14 years ago

Each owner of GOOG will have exactly as many votes after this "dividend". They will not be negatively affected. New employees and acquisitions will be negatively affected by receiving stock sans voting rights, though.

Google Plans To Split Shares 2-for-1

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