What is the difference between GOOG and GOOGL by Alphabet?
GOOG and GOOGL are stock symbols for Alphabet (the company formerly known as Google). The main difference between the GOOG and GOOGL stock symbols is that GOOG stock has no voting rights while GOOGL stock does.
The company created a new non-voting class of stock in April 2014, issuing one class C share for each class A share previously held by shareholders. Everyone who owned A shares at the time of the split received an equal number of C shares, but their voting rights did not increase. The action retained majority control of founders Larry Page and Sergey Brin. When companies go public, founders often lose control over time as additional stock offerings and sales leave them outnumbered.
Alphabet’s founders are determined to maintain control of the company, a goal shared by other technology tycoons. Markets and investors can be short-sighted in their insistence on immediate results, even at the expense of a long-term strategy. The stock split allowed Brin and Page to benefit from public market liquidity while retaining majority control of the company.
Key learning points
- Alphabet, Google’s parent company, has two publicly traded share classes that use slightly different ticker symbols.
- GOOGL shares are Class A shares, also known as common shares, that have the typical one share, one vote structure.
- GOOG Shares are Class C Shares with no voting rights attached.
- Because of their voting rights, A shares can trade at a premium to C shares; in reality, however, the prices of the two are often quite close.
- There is a third type of share, class B shares, which are held by founders and insiders and grant 10 votes per share. Class B Shares cannot be publicly traded.
What is the difference between GOOG and GOOGL?
Google’s parent company, Alphabet, announced a 20 for 1 stock split in February 2022. The split took effect on July 15, 2022.
GOOGL shares are categorized as Class A shares. Class A shares are known as common stock. They give investors an ownership interest and usually voting rights. They are the most common type of stock.
GOOG shares are the Class C shares of the company. Class C shares give shareholders an ownership interest in the company just like class A shares, but unlike common stock, they do not grant voting rights to shareholders. As a result, these shares usually trade at a modest discount to class A shares. These class C shares should not be confused with the type C shares issued by some mutual funds.
There are also class B shares that grant 10 votes per share, but these are only owned by founders and insiders and are not publicly traded.
A summary of the class structures
- Class A, first class: Held by a regular investor with regular voting rights (GOOGL)
- Class B: Owned by the Founders, with 10 times the voting power of Class A Shares
- Class C: No voting rights, held mostly by employees and some Class A shareholders (GOOG)
GOOG vs GOOGL: Which is a Better Investment?
Because GOOG shares have voting rights, they can be considered more valuable. Shareholders with these types of shares can control Google’s corporate policies, vote for the board of directors, and approve or disapprove important decisions.
For this reason, GOOG shares often trade at a slightly higher price than GOOGL shares, due to the additional voting rights. However, most retail investors cannot buy enough stock to significantly influence the company’s policy, making GOOGL the slightly more cost-effective choice. In practice, the difference between the two share classes due to arbitrage is usually small.
How voting shares are used
Often, activist investors get together and collect stocks to push companies to pursue shareholder-friendly initiatives that boost stock prices, such as cost cutting, share buybacks, and special dividends. This process can become hostile, with activists engaging in public battles to win board seats and wrest control of the company from management. After issuing non-voting shares to maintain majority control, Brin and Page need not worry about this possibility.
In 2017, S&P Dow Jones Indices announced that it would no longer add companies with multiple share classes or limited shareholder rights to the most popular indices, while retaining those already included.
Why is GOOG more than GOOGL?
Because A shares have more voting power and because these rights have some value, they often trade at a small premium. In reality, GOOG and GOOGL often trade at about the same price. For example, on August 1, 2022, GOOG shares opened at about $115.53 and GOOGL at $115.30. Sometimes one share class trades at a relative premium to another, but due to arbitrage opportunities, these spreads often close over time.
When was the GOOG stock split?
On July 15, 2022, Google executed one of the largest stock splits in history. It was a 20-for-one split, meaning that each investor with a share of GOOG or GOOGL stock before the split had 20 shares of the stock after the split. This affected all share classes of Google stock, making the shares significantly more affordable for retail investors.
What are Alphabet’s Class B Shares?
Alphabet also has a class B stock that is only owned by insiders and not traded on the stock exchange. So, the B shares are owned by Sergey Brin, Larry Page, Eric Schmidt and some other directors. Unlike A-shares which grant one vote per share, B-share shareholders get 10 votes.
It comes down to
There is certainly a difference between the price of the two types of Google stock you can buy, although it is relatively small. If voting at the shareholders’ meeting is important to you, aim for the A shares.