Google is a Behemoth in the online advertising industry, one such company that needs no introduction and is ubiquitous. Its dominance in the industry has made it a monopoly in internet searches and has altered industry operations. Is impossible to emphasise the degree to which Google’s total dominance of internet search has altered whole industries and how they operate. Most websites receive the majority of their traffic from search results, and research has shown that the first five or six results on Google Search receive more than 67.6% of clicks. Worldwide, Google has 4.3 billion users, which is a market share of 92.24% of internet users & If you compare its market capitalization to the GDP of countries, it ranks 12th on the list.
The company that we know as Google is today an amalgamation of companies owned by one holding, Alphabet, with different share classifications.
During the past two decades, Google has expanded from a small site to an all-encompassing internet juggernaut. Alphabet’s trailing twelve months (ttm) revenue rose by 37.45% year over year in Q1 22. Alphabet now has a return on equity (ROE) of 30.6% and a P/BV (price to book value) multiple of x6.1, which experts believe makes it one of the relatively undervalued stocks. One of the greatest ROEs in the last 19 years came from Alphabet, which makes Google a lucrative stock to invest in.
In 2014, Google (now Alphabet) announced its first stock split (NASDAQ: GOOG, NASDAQ: GOOGL), which proved to be a strategic move up until 2022, when Google announced another stock split in February scheduled to happen in July 2022.
However, many people have held off on investing in Alphabet because they are unsure of the between GOOG vs GOOGL; what does the split mean? And which Google stock should you look to buy: GOOG vs GOOGL? This blog aims to answer all these questions so read on.
How did Alphabet come into existence?
Google is one of the FAANG stocks, the publicly traded stock holdings of the American tech giants Facebook, Amazon, Apple, and Netflix. They are regarded as one of the world’s most well-known and successful technology companies. The present market capitalization of the FAANG businesses is almost $7 trillion as of Q1 2022 of which Google contributes about $1.56 trillion from Google.
In 2015, Google gave birth to its parent and christened it Alphabet. Alphabet is now in charge of overseeing all of Google’s activities after it was divided into numerous distinct entities.
Google, which is the biggest of these companies, provides services including search, advertising, maps, apps, YouTube, and Android. The “moonshot” X lab, Nest, Google Ventures, Google Capital, and other less closely related corporate endeavours are now all autonomous businesses housed under Alphabet.
The alphabet was formed with the idea to operate more swiftly as a group of little businesses rather than as a massive organisation made up of unrelated items.
What do you need to know about Alphabet’s issuance of Class C shares (GOOG)?
When analysing Google’s stock split history, it’s important to keep in mind that the company has two separate kinds of publicly traded shares.
GOOG shares are classified as class C, whilst GOOGL shares are classified as class A. Only class A shares of Google were publicly traded before the company announced a stock split to create the class C shares on April 3, 2014.
At the time of the split, Google’s share price was slashed in half. This required the creation of new class C stock, which doesn’t have voting rights at shareholder meetings. Since its creation, Google stock class C has seen only one “split” till July 2022.
Google is anticipated to issue mostly Class C shares for acquisitions and share option awards. Additionally, the introduction of class C shares also made it possible for Google to offer equity incentives to executives and staff.
Say you had 200 Class A shares right now. According to the 2 for 1 stock split, you will have 200 votes, one vote per share. Following the stock split, you will have 200 Class A shares and 200 Class C shares. Class A shares still have a vote, while Class C shares do not. As a result, you still only have 200 votes even if your share count doubles to 400.
The earnings per share will be cut in half as a result of the routine doubling of outstanding shares, but the overall profit distribution to investors will stay the same. (When twice as many shares are multiplied by half of the per-share earnings, the proportionate share of profits stays the same.)
What are the differences between various Alphabet share classes – GOOG vs GOOGL vs Class B?
|GOOGL – CLASS A||GOOG – CLASS C||CLASS B|
|Held by public||Held by public & Promoter||Held by Promoters|
|Voting rights – 1 vote||No Voting Rights||Voting rights – 10 Votes|
|Issued at IPO||Bonus, 1 for every Class A||Never issued to public|
|Change in voting rights if sold.||No Change in voting rights if sold.||Ensures promotor control|
Even though Google is a huge organisation, its senior executives frequently aim to maintain the most control possible over the business in order to manage its further expansion.
At the shareholder’s meeting, each Class A Shareholder is entitled to one vote. The following class is the non-voting Google Class C, as we have established above. They each own an equal share of the company’s stock.
Another class of shares, the class B-shares of Alphabet, is exclusively owned by insiders and is not listed on stock exchanges. As a result, a few additional directors, Sergey Brin, Larry Page, Eric Schmidt, and others, own the class B-shares. B-share holders are entitled to 10 votes, as opposed to 1 vote per A-share holder.
So which stock to buy? GOOG vs GOOGL
Class A is definitely more significant to you if you’re an institution, an outspoken active investor, or wish to vote in meetings. In order to drive companies into doing shareholder-friendly actions that raise stock values, such as expenses, share buybacks, and special dividends, activist investors often pool their resources and buy up shares.
GOOG Vs GOOGL Stock: Any special considerations to know?
Earlier, active investors would hoard or accumulate stocks to press companies to initiate shareholder-friendly methods like cost-cutting or share buybacks or special dividends to boost the prices of the shares. This often led to public battles by investors to gain as much control of the company as possible. This was curbed after Google issued non-voting shares.
Then, in 2017, S&P Dow Jones Indices said it would no longer consider adding companies for those with multiple share classes or limited shareholder rights while grandfathering(special allowance for companies to continue operations that were approved before implementing new rules) those who already included.
Alphabet’s shares won’t add any new tasks to your to-do list. Because the total value of your stocks won’t change, you won’t need to expend much effort trying to understand new tax laws. You will get additional shares in your account without having any voting rights.
What are the different ways to invest in Google Stock?
Now that we have understood the differences between GOOG vs GOOGL stocks and which Google stock is a better buy, let’s understand how to invest in either of these stocks.
- Invest directly:
By creating a US brokerage account with a foreign brokerage that has a physical presence in India or a technological platform like Stockal that offers this service, you can invest in GOOG or GOOGL stocks from India.
Stockal is efficient, compliant, and even permits fractional investments. You can own Alphabet shares with only a single click if you follow the rules and provide the required paperwork.
Because of the dangers associated with the stock market, the majority of investors are advised by financial professionals to invest in a diverse portfolio of asset classes and funds that own thousands or even hundreds of equity assets. An alternate way to purchase Google shares from India is through an ETF.
ETFs are collections of several stocks and bonds that trade as one fund. In many respects, they resemble mutual funds. However, ETFs, which are traded on the stock exchange and have real-time pricing, provide a straightforward and reasonably priced method of acquiring exposure to a sector or group of companies.
- Mutual funds:
Similar to ETFs, investing in mutual funds that hold stocks like Google like Red Oak Technology Select, Fidelity Select Technology, Northern Technology or Janus Global Technology T is a method to reduce your risk of stock price swings while still getting the advantages of investing in a market giant like Google.
If you have still not bought shares of Google, then this is a very good time to consider investing for the long term, given the market conditions undergoing a price correction.
Alphabet has rewarded its investors with a gain of 4,610% since its IPO, despite undergoing corrections in the past. There is no iota of doubt on Google’s search dominance as it holds 92% of the share market globally and 28% of the world’s digital ad market.