Google Announces Stock Split

April 13th, 2012 at 12:46 pm
 


Google has recently reported a somewhat mixed Q1 results. Although Google reported higher Q1 earnings, but revenue seems to be a bit down. But what may somehow be a surprising announcement given along with the Q1 results is the planned stock split for Google shares.

Yes, Google has announced that it is planning a 2 for 1 stock split by creating a new batch of stocks it will call as Class C shares. For those who might not be that privy about stock jargon, a stock split is a means of dividing a single share into either two or more equal parts. In the case of the Google stock split, a share will be divided into two, with one becoming part of the new Class C shares. Value of the stock is also equally divided as well, which avoids the possibility of dilution of the stocks value.

The new Class C shares that Google will be offering will not be carrying any voting power. The said stock split is said to be engineered in order to preserve corporate governance and preserving the voting power of the founders. The new class of shares will be distributed through a stock dividend to all the existing shareholders of the company. For each share of stock that a shareholder has, he or she will be given an equal number of non-voting shares, doubling the total number of shares each one owns in the process.

According to Google founders Larry Page and Sergey Brin, the reasoning behind the surprising stock split will ensure that the founder-led approach to managing the online search giant is maintained. The founders just wanted to ensure that they still have better control over where Google may be heading into the future. By doing so, they might have been able to maintain what vision they still have for the company and may have averted any sense of corporate turmoil even before it takes root. It may be a case of trying to avoid having too many cooks that might spoil the broth.

Well, the Google founders themselves have successfully led the company into what it has become today. Surely, those happy shareholders will look at the stock split at a more objective light. If ever they still wish to value their shares and expect the company to still reach greater heights, they would surely welcome handing in the reins of the company to its original founding leaders that has done so much for Google’s success.

 

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