After Google Inc Stock Split, S&P 500 Pondering Changes

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After Google Inc Stock Split, S&P 500 Pondering Changes
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Google Inc (NASDAQ:GOOG)’s complex stock split will not only lower the shareholders’ say in the management of the company, but will also alter the way the company is valued on the popular Standard & Poor 500, says a report from Smh.com. The two-for-one stock split has forced the index to rethink how to accommodate the split on the exchange, and devise rules to deal with similar situations in the future.

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S&P modifies rules

Post stock split, there will be a major change in how the value of Google Inc (NASDAQ:GOOG) is reflected on the popular S&P 500 index. Previously, S&P decided to do away with the class A shares and include class C shares, but on Tuesday, S&P Dow Jones decided to include both the class A and the class C shares, which means that total stock trading on S&P will now increase from 500 to 501.

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Additionally, S&P is also making some variations in its rules for future situations, to include the shares in case of stock split only after meeting certain criteria. The criteria are tests of liquidity and materiality level. At present, S&P Dow Jones is analyzing the companies in the S&P 500 that are split into several stocks, and will decide by 2015 which will be added to the index.

As of now, S&P lists 50 such companies split into multiple classes of stock including Hathaway, Brown-Forman and CBS. Greater numbers of companies are resorting to stock splits to get protection from activist shareholders to retain control and decide on the dividend and buyback policy, according to Howard Silverblatt of S&P Dow Jones indices.

Details on Google stock split

As of now, Google Inc (NASDAQ:GOOG) has two classes of stock; A class that are bought by public and carry one voting right, the class B share, which are controlled by the company’s founders with 10 votes. After paying the dividend in the form of class C shares, Google will have double the number of outstanding shares from the current level.

The stock split will be official on April 2, when Google will pay a dividend to the existing class A and class B shareholders using the newly created class C stock. The new class C shares will not have voting rights, which is not usually the case with other companies.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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2 COMMENTS

  1. The stock split makes sense because a person who wants to invest $1000 in a stock cannot even buy one share of GOOG. This will give other investors a reason to get into the Google story.

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