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The New Share Class Warfare

After hours and after earnings last night, Google (GOOG) announced a 2:1 share split.  However the split has an ulterior motive other than reducing the cost per share, as Google’s co-founders are also looking to revamp the corporate structure as a result.  With the split, a new share class will be formed other than the already existing Class A and Class B shares.  This new class will trade under a different symbol but will retain all the rights of the previous two share types, including the ability to collect any future dividends.  Here’s the catch though: ownership of these Class C shares retain no voting rights.  This allows founders Brin and Page to issue more debt without diluting their control over the company.  Over time, their ownership has dwindled down to just over 50% because of new issuance of Class A stock and the sale of their Class B shares (possessing a 10 vote per share premium).  Since companies cannot issue shares with privileged voting rights after the fact, this new non-voting share class provides an opportunity to raise capital without giving up voting control.  Keep an eye out for companies to follow suit and offer a non-voting share class..  this could become the new normal.

 

New Share Class Gives Google Founders Tighter Control – NYTimes.com.

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