Which stock should i buy goog or googl

As a way to avoid ceding majority control of the company Google created non-voting shares Class C through a 2: Over time, as the supply of Class C shares outpaces Class A shares, the discount between the two shares will increase. The discount between Google Class A NASDAQ: GOOGL and C NASDAQ: GOOG shares is growing. I believe it will continue to grow with the proliferation of Class C shares available on the market.

The result is increased supply without the requisite demand. In January , the board was tasked with establishing a special committee to consider ways to slow the dilution of voting rights and in April , Google announced a 2 for 1 stock split by way of a special dividend.

The proposal we announced today is consistent with the governance philosophy we articulated when we took the company public, as well as the trend for newer technology companies to adopt strong dual-class structures.

We believe that it will provide great competitive strength - insulating Google from short-term pressures, whatever the source, for a long time to come, while also giving us more flexibility around equity grants. In other words, the goal of the split was to ensure the founders maintained majority voter rights while creating a currency for acquisitions and compensation.

Alphabet Inc. - GOOGL - Stock Price Today - Zacks

The response from the announcement was mixed and some shareholders protested the decision. A Massachusetts based pension fund filed suit. It felt the addition of no-voting stock would allow the founders to "entrench their control" on Google. Just before the case entered court Google settled with the following consessions:.

Both actions are meant to keep the two shares moving in tandem, with a minimal spread, if any. Finally, with all obstacles cleared, on Thursday April 4, , the new shares were listed. Here's a chart of what Class A and Class C are doing today.

The price differential between GOOG and GOOGL has grown significantly. Clearly the market is discounting GOOG, but how far will the discount go? In the article GOOG Vs GOOGL: A Classic Pairs Trade , James Angel asks the same question and advises his readers to go long GOOG and short GOOGL until the price differential narrows.

He argues that there should be no differential in value due to voting rights, claiming that voting rights currently hold no value because Larry and Sergey have majority voting rights, which effectively makes the right to vote pointless.

Based on several studies, Angel predicts the value of a Google proxy vote to be on the low end of. I believe the discrepancy will continue to widen with the proliferation of Class C shares. Though it may exist, it's hard to imagine a scenario where the growth in supply of Class C shares doesn't outpace Class A shares, and without the requisite increase in demand in Class C shares, the cycle will only continue to fuel the discount causing Class C shares to decline in value.

The true-up effectively places a floor on how low Class C shares will go.

Which Google Stock Symbol (GOOG or GOOGL) Should I Buy?

The mechanism was put in place to ensure Class C shares were "safe" for at least the first year and to reduce volatility. However, after the day "Lookback Period" the true-up expires and Class A shares are left to fend for themselves.

Note, the proxy vote to decide on the payment amount and method cash, Class A, Class C will occur after the day true-up expires. Even with the true-up, however, Class C shares are declining in value, which some, like Angel, view as an opportunity, but in truth, the only thing that's certain is the uncertainty.

What happens if investors wait for the proxy vote to see what the payment will be and it's all in Class C shares? Even worse, what if investors are expecting the payment to make up for the full price differential?

The average investor may have heard about the "true-up" offer, but not the details behind it. According to the Q3 10Q, based on the VWAP of Class A and C Shares on Sept. The true-up is only meant to make up for a percentage of the loss. Here's an excerpt from the settlement agreement submitted to the SEC:.

The following graph provides an illustration of what the Purposed Payment Per Share would be compared to the Price Differential. Apparently the value of a Google proxy vote is real and growing, right along with the number of Class C shares. The discount to Class A shares will continue to grow as the supply of Class C outpaces Class A.

If you're looking for volatility, Class C is the way to go, if not, steer clear of Class C shares until the dust settles.

The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it other than from Seeking Alpha.

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Summary As of March , Google founders owned Google plans to use Class C shares as a way to pay for acquisitions and compensation. The History of GOOG In January , the board was tasked with establishing a special committee to consider ways to slow the dilution of voting rights and in April , Google announced a 2 for 1 stock split by way of a special dividend. Just before the case entered court Google settled with the following consessions: Class B - In order to sell Class C shares, the founders must sell an equal number of Class B super voting shares.

Proposed Payment true-up - Google will make up for a portion of the average price differential between the two classes of stock for days. Investing Ideas , Long Ideas , Technology , Internet Information Providers. Want to share your opinion on this article?

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