Google Preparing for a Stock Split in April

What's This?

A sign is posted outside of Google headquarters on January 30, 2014 in Mountain View, California.

Image: Justin Sullivan/Getty Images

By Stan Schroeder2014-01-31 09:58:40 UTC

As Google's stock value soared above $1,100, the company is finally getting ready for a stock split, scheduled for Apr. 2, 2014.

Generally, a stock split means the number of stocks in a public company is increased, with the price being adjusted so that the market capitalization remains the same.

See also: Good Riddance: Motorola Results Drag on Google's Q4

The company co-founders Larry Page and Sergey Brin started discussing the move three years ago, but it was delayed due to resistance from other shareholders, who thought the stock split could unfairly benefit the co-founders, the Associated Press reports.

To alleviate these fears, Google settled a lawsuit from shareholders, agreeing to pay up to $7.5 billion if the split doesn't go according to plan.

And the plan is as follows: the stock split will create a new class of "C" shares, which carry no voting power, with one share of C stock being distributed for each share of Class A stock owned as of March 27. The two stock classes will trade under different symbols: Class C will be traded under company's current ticker symbol, "GOOG," while Class A will be traded as "GOOGL".

There's a third class of stock, Class B, primarily owned by Page and Brin, which gives them ten times the voting power of Class A. Altogether, the two co-founders control about 56% of shareholder votes.

The most visible effect of the stock split will be the reduction in the stock price, which should be cut roughly in half. Currently, Google's stock is priced at $1,135.

If, however, the average price of Class C turns out to be between one and five percent below the price of Class A shares during the first year after the stock split, Google will have to pay Class C shareholders, with the amount depending on the size of the gap. According to court documents submitted to Google, this scenario is unlikely.

Have something to add to this story? Share it in the comments.

Topics: Business, Stock split