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The first decision you should make before putting some money into Alphabet Inc is actually what stock are you going to invest in – GOOG or GOOGL? Find everything you need to know about both in this guide.
The world is going technological and the safest way to ensure dividends is to invest in technology-based companies like Alphabet Inc. Google became a subsidiary of Alphabet Inc in 2015 while keeping their stock tickers GOOG and GOOGL.
Google proposed the idea of dividing their stocks into 2 tickers, GOOG and GOOGL in 2012. The idea wasn’t implemented until April 2014. It was created to secure the interests of the founders – Larry Page and Sergey Brinn – should the company ever go public.
More often than not, proprietors lose their control once an establishment is made public by the selling of a lot of shares. The current stock ticker symbols for Alphabet are GOOG and GOOGL and the major distinction between them is that GOOG shareholders lack the right to vote while GOOGL shareholders have voting rights in Alphabet Inc.
When the Alphabet was founded, the creators had the vision to collect and arrange the information of the world. Usually, when organizations are made public, the owners lose out to other shareholders, and in some cases, end up losing the purpose on which such establishment was founded due to the interest of greedy shareholders. The method of GOOGL and GOOG stock split helps Larry Page and Sergey Brinn to keep the charge of their company.
These are the class A shares, regular shares, available to the general public and they give investors the “one share – one vote right”. There are about 299 million GOOGL shares that have been bought. The decision-making votes including executive pay, bonuses, promotions, diversifying and even profit sharing are cast by this group and group B shareholders. Group C shareholders do not have any say in the vote regardless of whether or not the decision could have an impact on their returns.
These are class C shares. Basic shares as well, but the investors in this category do not have the right to vote on executive decisions. The stocks are sold at a cheaper price in comparison to class A shares. There are about 349 million GOOG shares that have been purchased by investors.
As compensation for investors in the GOOG shares for their inability to vote, an agreement holds that at the finish of each year, the shareholders must be compensated should there be a major difference in profits of both shares. Also, each time a GOOG share is sold, the company is obligated to convert a class B share into Class A shares. This group is generally constituted by low ranking workers in Alphabet who may not need to concern themselves with the executive decisions.
Class B shares also exist, in which the shares have 10 times the value of GOOGL. 90% of class B shares belong to founders Sergey Brinn and Larry Page. They are not sold to the general public and are retained for founders and high ranking officers within the organization. Over 47 million shares have been sold in this category.
Critically looking at it, with class B shareholder votes having 10 times more power than GOOGL share. In a situation where the founders lose their controlling power, they still have roughly 470 million votes which are about 60%, ensuring they have their way in any voting.
Sometimes, activist investors form a coalition and try to get organizations to derail from their initial vision and become gain-driven establishments. The process is usually lengthy, with owners struggling to keep their position on the board from being usurped. The development of GOOG and GOOGL was a preventive measure by Larry and Sergey to keep such from happening.
As people began to make use of internet search engines, Alphabet progressed and expanded. They nearly had a monopoly of the business, owning over 85% of the market. Alphabet lost the battle not only in transitioning to mobile phones but also in the rise of social media. They became inferior to social media platforms like Facebook, Instagram, Twitter, e.t.c. Alphabet Inc. really shook and suffered critiques from many of its investors and has had to adjust to the new trend.
When considering which share to invest in, GOOGL shares offer investors the right to vote, while GOOG does not. Although, with the founders having about 60% of company shares and GOOGL shareholders sharing the remaining 40% with people who may not agree with their views, the voting power is quite insignificant. To quite a number of people, having stock ownership is all about having a feel of power and the inability to partake in decisions does not agree with them.
Although, GOOG stocks have been performing better in terms of generating profits despite being cheaper than GOOGL stocks for the same number. Although the profits of both share stocks have been expected to even out over time, GOOG shares are the better option to purchase if the investor is more concerned about having better returns than having little power in voting decisions although the difference in voting and non-voting is essentially non-existent.
After Alphabet divided stocks into GOOG and GOOGL, many other tech companies followed suit, like Box Inc, Lyft, Pinterest. All created either non-voting shares or public voting class shares that possess limited power in comparison to the privately sold shares.
In 2017, SNAP went a step too far by only introducing non-voting shares which caused an immediate backlash by investors. Currently, many organizations have shares that allow some investors to vote while the other shares do not give voting power to investors. This move is in place to protect the interests and control of the founders, which can all be attributed to the GOOG and GOOGL initiative.