Sunday, May 4, 2014

Google's stock split

It's been a few weeks now since GOOG stock split into what is now GOOGL and GOOG.

For each share of GOOG that a person held, pre-split, they retained 1 GOOGL share, which was the renamed, normal class of shares, and they were issued a new, non-voting share under the old name GOOG, which is different to the old GOOG, which was renamed GOOGL.

Nice and simple.

What's been irking me over this time is that the share prices are so similar. GOOGL currently trades for $533.87, and GOOG is trading for $527.93. That's about 1% apart, and the biggest difference has been about 2%.

It seems to me like a share that has a voting right should be worth more than one that doesn't. More than 1% more.

There's a special class of shares in Google that are only held by Larry Page, Sergey Brin and Eric Schmidt, which each have 10 votes per share. This is the reason for the low difference in price between GOOGL and GOOG; it doesn't really matter how many shares anyone has in Google because they can never affect anything with a vote, so all shares held by the public, or even institutions, are effectively non-voting.

Except, if I recall correctly, the super special class of shares cannot be transferred without converting to an ordinary share.[citation needed]

If that's the case, then over time, these special shares will disappear, even if it is on the time scale of a lifetime. So the better long term investment is in GOOGL, as one day, they'll actually have a say, whereas GOOG will remain merely a token to partake in profit-sharing.

I guess that the value difference that's put by the market at a mere 1%. If I actually had any shares in Google, I'd have sold all my GOOGs and bought the same number of GOOGLs, paying the 1% right-to-vote tax. Perhaps it's the love of democracy that I have that makes me sad and confused that the value of a (promise of a) vote can be so little.

Anyway, let's see how this plays out.