On 1 Feb 2022, Google’s parent company Alphabet announced that its board has approved plans for a 20-for-1 stock split as a part of the company’s quarterly earnings statement. Following the news, Alphabet’s stock rose more than 9% in after-marketing trading.

 

Expansive Market Capitalization

The announcement comes 1.5 years after Apple split its stock, giving three shares for each share that are owned by people. Alphabet and Apple are among the few technology companies that have witnessed their market capitalizations stretch into the trillions, as investors opted for profitable growth.

Moreover, the 20-for-1 split outdoes the recent stock splits from Apple as well as Tesla. Both the companies opted for a 4-for-1 and 5-for-1 split respectively on the same day in August 2020. Whereas, the graphics chip maker Nvidia, another tech stock popular with retail investors, split 4-for-1 in July 2021.

 

Splitting of the Shares

According to reports, Alphabet intends to split the Class A, Class B and Class C shares of the stock, while the change requires the approval of shareholders. Each shareholder at the close of business on July 1 will receive 19 additional shares for each share of the same class of stock they own toward July 15.

Previously in 2012, Google added a third class of shares, Class C, with no voting rights. The company already had Class A shares that carry one vote per share, and Class B shares that are held closely by founders and early investors with 10 votes. Alphabet maintained the stock structure through its 2015 rebrand to Alphabet.

 

Effective Stock Split

Stock splits lower the price of a stock to possibly make it more attractive to retail investors. What makes Google’s stock split interesting is just how long it took for the company to move forward with actually splitting its share. In a letter that included the 2004 prospectus for Google’s initial public offering, Google’s founders Larry Page and Sergey Brin emphasized that they would always act with the long-term welfare of the company and shareholders in mind.

In addition, the founders also described the introduction of the third class as “effectively a stock split” in a 2012 letter and said it was something many shareholders had been clamoring for. Moreover, the 2-for-1 stock split came in 2014—before the switch to Alphabet.

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