Google shares drop for good reason
Google shares closed at $1,135.10 a share yesterday. It should open around $570 a share today. This way, it makes it easier for small shareholders to buy more shares, decrease brokerage fees and more.
It is also a communication move. Google is confident that its shares will do well in the foreseeable future. In reality, it doesn’t change anything when it comes to market capitalization and the company’s performance.
Yet, the real reason behind Google’s stock split is that its founders will secure their voting power. Sergey Brin, Larry Page and former CEO Eric Schmidt are the only executives with Class B shares, with Schmidt owning a lot less of those shares. Each Class B share gets you ten votes.
In the past, Google gave Class A shares as stock options or in a company acquisition. Each Class A action grants you one vote. Over time, there was a risk that Brin and Page’s voting shares slowly decreased.
New issued Class C shares don’t have any voting power. These are the ones that you can now buy on the stock market. When Google is going to compensate a company or a person with shares, it will use Class C shares instead of regular Class A shares. For example, when Google wants to acquire a company in stock, the acquired company won’t get any voting power.
In other words, today’s move will solidify Brin and Page at the helm of Google. These days, the two co-founders have 55 percent of the total votes. It means that they always have the final word when it comes to deciding something with the board. And with the stock split, it’s not going to change any time soon.