Google Shares Become Affordable With 20-to-1 Stock Split

The Google name is displayed outside the company's office in London, Britain, on Nov. 1, 2018. (Toby Melville/Reuters)

Alphabet, Google’s parent company, is splitting up its stock to enable affordability, leading to a surge in the share price as retail traders will now be able to own a part of the company instead of opting for fractional shares.

“Alphabet today announced that the Board of Directors had approved and declared a 20-for-one stock split in the form of a one-time special stock dividend on each share of the Company’s Class A, Class B, and Class C stock,” the company said as part of its quarterly earnings report (pdf) published Tuesday.

If stockholders approve the move, each one will receive “after the close of business on July 15, 2022, a dividend of 19 additional shares of the same class of stock for every share held.”

To own a share of Alphabet, traders need to invest close to $3,000. “The reason for the split is it makes our shares more accessible,” Ruth Porat, Alphabet’s chief financial officer, said in a conference call. “We thought it made sense to do.”

Setting aside the dip in the early part of 2020, the stock markets have gone up steadily during the pandemic with an increasing number of new online traders taking their positions behind the computer screen as the economy locked down all around them. With a market capitalization of almost $2 trillion, Alphabet stock split will make it easier for nascent investors to own a piece of America’s third-biggest company.

Alphabet’s share price increased more than nine percent following the announcement and has now settled at $2,943. After the split, a share is expected to cost less than $150. The tech giant surpassed Apple, Tesla, and Nvidia’s 4-to-1, 5-to-1, and 4-to-1 respective splits that happened last year.

Regarding voting rights, owners of Class A Alphabet shares can vote once, while Class B shares held by early investors carry 10 votes per share. Google had introduced Class C shares, which carry no voting rights, in 2012, and was approved through stock splits in 2014. This is the second stock split since the company went public in 2004.

Google founders, Larry Page and Sergey Brin, own 83 percent of the company’s Class B shares. These do not trade on open markets. According to FactSet, they also own 12 percent of Class C shares. The duo has a combined net worth of more than $225 billion.

Besides making it cheaper, a stock split would enable the company to list on the Dow Jones Industrial Average where the index is price-sensitive and the current stock price would disrupt the existing weights.

According to some analysts like David Wagner from Aptus Capital Advisors, Alphabet shares may become more valuable with the stock split.

“We all know that does not increase the fundamental value of a company,” he wrote, as cited in Barron’s. “But from what we’ve seen in the market with TSLA and NVDA, people like to chase stock splits, for some reason.”