Two-to-one split to create Class C shares with no voting rights, cementing founders’ control
Almost two years after Google announced plans to issue a new class of non-voting shares through a stock split, the tech giant is ready to go ahead with the controversial move.
Alongside its fiscal 2013 earnings, the company announced that it would go ahead with the creation of its Class C capital stock ‘as a dividend to our stockholders’ on April 2. The split will double the number of Google shares and halve their price, and the newly created shares will have the same economic rights as Class A shares but carry no voting rights.
The new class of Google shares and the company’s voting structure could increase the control over the company already held by founders Larry Page and Sergey Brin. Page and Brin hold a majority of the Class B shares, which carry 10 times the voting power of Class A shares. Between them, they control 56 percent of shareholder votes but own just 15 percent of existing stock.
According to Google’s announcement, one Class C share will be distributed for every Class A share stockholders own as of March 27, 2014. The value of the shares will start out the same but they will trade under separate tickers, exposing the Class C shares to a drop in value relative to their Class A counterparts.
Google was obliged to settle a shareholder lawsuit to make way for the stock split. As part of the settlement, cleared by the courts late in 2013, Google agreed to compensate Class C shareholders if the Class C share price is at least 1 percent below the Class A price in the first year of trading. Compensation rises along with any difference in trading price, up to a maximum of 5 percent.
Page and Brin first announced plans for the split in 2012, saying the move would be accompanied by provisions to ‘ensure all shareholders are treated fairly from an economic perspective.’
‘Some people, particularly those who opposed this structure at the start, won’t support this change,’ Page wrote in a letter to shareholders at the time. ‘But after careful consideration with our board of directors, we have decided that maintaining this founder-led approach is in the best interests of Google, our shareholders and our users.’
