Google’s stock-split to appease founders costs $500 million.
The split of stocks that was instigated a year ago, making 3 categories instead of 2, will cost Google over $500 million, a figure that hardly impacts on the company’s cash holding of $64 billion. However, after a class action from shareholders, investors are now dubious about the stock split as many will not have corporate voting rights with the new category C stocks.
The split came about to make sure that founders Larry Page and Sergey Brin maintain control of the largest internet search engine in the world with a market value of $375 billion. In 2014, Google added additional class C shares to the existing class A and class B. Class B shares are nearly solely owned by Page and Brin. However, Google have issued many more high level class A shares to pay for acquisitions and so the founders’ shares have slowly but surely become worth less in terms of voting power: Class C shares were then created with no voting power attached. At the time, Google shares fell over 52% and have made little recovery, standing at $534.80 as of Friday.
Shareholders submitted a class action lawsuit and Google agreed to compensation for class C owners if the average price fell more than 1% below class A shares in the first year.
The year is up and the average price difference is between 1% & 2% with a final figure to be agreed in a month’s time when analysts have worked through the data. Compensation will need to be paid by July. Class C shareholders will still not have corporate voting power.
MT4 chart: GOOGLE
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