This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Google's Stock Split: Good For Shareholders? (Update 1)

Updated from 10:41 a.m. EST to provide analyst comments in the thirteenth paragraph.

MOUNTAIN VIEW, Calif.(TheStreet) - Google's (GOOG) decision to offer an unusual stock split last night left some scratching their heads. The decision may not be such a bad thing, though.

Google announced that it would be creating a new class of stock, effectively issuing a stock split that is "designed to preserve the corporate structure that has allowed Google to remain focused on the long term."

On the conference call, CEO and co-founder Larry Page said that many investors have asked for a stock split, and this effectively grants it to them. This, however, isn't the traditional stock split, in that Google is creating a third class of stock that will have no voting power. Google already has class A and B shares.

CEO Larry Page

It allows Page, co-founder Sergey Brin, and Chairman Eric Schmidt to maintain the majority of voting power in the company, something the Internet giant noted in the founders' letter. "The main effect of this structure is likely to leave our team, especially Sergey and me, with increasingly significant control over the company's decisions and fate, as Google shares change hands...," the letter said.

There is, however, a "stapling" requirement. This means that, above set thresholds, if the founders and Schmidt's economic interest in Google declines, their votes will as well.

Not everyone, though, has been won over over by Google's move. Citigroup analyst Mark Mahaney, for example, even called the split "odd" in a research note. Nonetheless, Page and Brin note the "structure will also make it easier for our management team to follow the long term, innovative approach emphasized earlier..." In other words, the co-founders and Schmidt are committed to Google in the long run, and they want Google to be focused on the long term, not the short-term demands of Wall Street.

Google has created vast wealth since going public in 2004, and the company noted that focusing on the long-term is important maintain this momentum. Over the past five years, shares of Google have gained 38%, outperforming the 26.2% return in the Nasdaq, and the -3.89% return in the S&P 500.

Companies like Apple (AAPL) and Amazon (AMZN) that underline the benefits of focusing on the long-term. Over the past five-years, shares of Apple have gained 557.76%, while Amazon's stock is up 349.63%.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,982.59 +22.02 0.13%
S&P 500 1,978.91 +0.57 0.03%
NASDAQ 4,444.9090 -4.6550 -0.10%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs