Co Founders Larry Page and Sergey Brin have finally given the green light for their first stock split since they went public almost ten years ago.
The second of April will be one of the more interesting days in Google’s history, when the cofounders and major shareholders will finally press the “ Go” button on splitting their stock, a maneuver which has been on their agenda for at least three years.
What looks like being a complicated procedure will finally get under way, despite ongoing resistance from a number of blocks of Google shareholders, who were reported to be concerned that Messrs. Page and Brin stood to benefit more from the procedure than the main stream stockholders.
According to industry reports, Google’s founders were reportedly equally reluctant to give their blessing to split the stock in the company that they founded way back in 1998, amid genuine concerns that if the stock split did not go according to plan they stood to see their ability to control the destiny severely diluted.
In order to ensure, as much as possible, that “no spanners would thrown into the works” Brin and Page recently rapidly settled a lawsuit raised by disgruntled shareholders, reaching a settlement that could reach as high as $7.5 billion in the process.
According to information available on the proposed Google stock split, a whole new category of shares will be created in the publicly held company. To be known as class “C” stock, these shares will not carry any form of voting power.
Current Google shareholders will be entitled to acquire a single class C share for each share of voting Class A stock that they hold as of March 27th, with the value of the current stock being initially equally divided between the two share types. Once the stock split procedure has been successfully completed, both shares will trade and be valued as separate entities, with the Class C shares being handed the “GOOG” ticker symbol with Class A shares being quoted and traded under the symbol “GOOGL.”
Larry Page and Sergey Brin’s Google stockholding are solely in Class B stock, in which they enjoy more than ten times the voting power than each Class A share. This interesting equation translates to the fact that the Google’s founders, despite currently owning less than 15% of the 19, 605, 052 shares of common stock stock that was originally issued in the company when it made its IPO in 2004, the due control 56% of the shareholder votes.
Over the years Google used a lot of their Class A stock for rewarding employees and allowing financial acquisitions, meaning that Page and Brin’s voting power has been gradually diluted. Under the conditions of the stock split, Google will be able to continue to provide employees with stock options, through the innovative (but not too original) practice of creating a new class of non-voting stock, without further diluting their own voting power.
With all of these procedures safely in place, after a reputed three years of careful planning, on the 2nd of April 2014, Google’s stock price will drop to around half of its current value while, at the same time, the company will retain their market value, which sits today at around $380 billion.
There are some fears among the financial community that as well as Google shareholders that the non-voting status of the Class C stock will bring about a situation where these shares will begin to trade at significant discounts to the Class A stock.
To allay these fears, Brin and Page have reportedly sanctioned a procedure that will see Class C shareholders receive some form of compensation in the event that the average price of their stock falls to a level at least 1% below that of the Class A shares during the first twelve months after the split, with the compensation payment increasing correspondingly, to a maximim of 5%.