by Robert Martin | July 24, 2014 9:08 am
Google (GOOG) or Google (GOOGL)? Either way, Wall Street seems to be taking the stock split in stride.
Google reported earnings last week — the first report since splitting Google stock into two classes of stock — and results were largely positive. If Google stock investors were confused about what’s in a name, they aren’t showing it: Both GOOG and GOOGL are up about 4% since the close on the day of earnings.
And analysts liked what they saw in Google’s earnings report. In all, Google stock got higher price targets from Canaccord Genuity, Oppenheimer, Deutsche Bank, UBS and CRT Capital.
Google announced a 2-for-1 stock split back in January, and it finally took effect last April 3. The result: GOOG has been joined by GOOGL, each representing different classes of Google stock.
Confused about what the difference is and whether you should care? Don’t worry — we’ve broken down the Google stock split for you and rounded up some of the best commentary we could find.
Yeah, some stock splits just result in more shares of stock and thus a lower share price per share. But that’s not the case here. Like we said, there are now two different Google stock tickers to choose from.
Why? Well, the big differentiator is simple: voting rights. And the motivation is obvious: helping founders Larry Page and Sergey Brin, along with executive chairman Eric Schmidt, stay in control.
A quick summary:
A few months after the split, there isn’t much of a price difference between the two classes of Google stock. As of Wednesday’s close, GOOG stock was worth $595.98 per share, while GOOGL stock was going for a 1.5% premium: $605.19.
Google stock investors — and, even more importantly, potential investors — must know more than just the specifics of the split, though; they must know what it means for their own portfolios.
According to Dan Ritter at Wall St. Cheat Sheet, not much has changed as the result of the GOOG vs. GOOGL distinction. As he wrote:
“This may sound like a somewhat contrived way for executives to maintain control of the company, and it kind of is, but this is fine. A bet on Google has always been a bet on Brin, Page and Schmidt. They’ve argued that from from the beginning, and it’s worked out well so far. The stock split is a mechanism to preserve what’s worked for years at one of the world’s greatest Internet and technology companies.”
Michael Liedtke, a tech writer for The Associated Press, even noted that Google isn’t the only company to pull this kind of trick. As he put it:
“Although still rare, Google’s reliance on nonvoting stock to protect their founders’ interests isn’t unprecedented in the technology industry. Facebook (FB), LinkedIn (LNKD) and Yelp (YELP) all have issued nonvoting stock for the same reason as Google. Both cable and Internet service provider Comcast (CMCSA) and cable-TV channel network Discovery Communications (DISCA) already operate under similar stock structures to the one that Google is setting up.”
One thing to be aware of, though, is that the new Google stock price might breed a little bit more volatility. As Louis Navellier explained:
“Splitting Google stock may make the shares a little more volatile as it opens the stock up to more activity from day traders who were kept at bay by the four digit stock price, but that can actually be good for us as it creates buying opportunities from time to time.”
As of this writing, Robert Martin did not hold a position in any of the aforementioned securities.
Updated from April 8, 2014.
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