This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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

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 - Get Report) and Amazon (AMZN - Get Report) 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
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!
SYM TRADE IT LAST %CHG
AAPL $124.25 -0.14%
AMZN $370.26 -0.50%
GOOG $542.56 -0.99%
FB $81.66 -0.67%
TSLA $187.59 -0.63%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs