More than 330 million new Google Inc (NASDAQ:GOOG) shares are set to be issued on April 3rd. These Class C nonvoting shares will in effect cause a “stock split” where Google Class A and Class C shares trade independently. Experienced traders follow these kinds of situations closely to see if they can profit on a potential “arbitrage” between the two share classes.
Google’s stock split: Possible trading opportunity
According to Jeffrey Burchell, co-chief investment officer of Aston Hill Financial Inc. (TSE:AHF) (OTCMKTS:AHFCF), it’s possible a trading opportunity could arise if the two classes of Google Inc (NASDAQ:GOOG) shares diverge. He pointed out that even though Google is taking precautions to prevent it, dual-class equities typically diverge over time in U.S. equities markets. That said, Google Inc (NASDAQ:GOOG) share’s may not veer apart because the company has arranged to reimburse holders of the new Class C shares should the price not track the existing Class A stock. Class B Google shares have extra voting rights, but are not traded publicly.
“Something as stupid as that might exist for half a day, where if people get confused about the different rights and obligations of the two different shares, and we might actually make money on it,” Burchell continued. “We don’t think it will happen, but we will be here watching it, and if there’s the slightest anomaly we have the structure to adjust.”
Earlier lawsuit settled
Google Inc (NASDAQ:GOOG) first announced its plan to create a new series of nonvoting Class C shares back in in April of 2012. Almost two years later, the plan has finally come to fruition and the shares are to be distributed as a dividend to current shareholders on April 2.
The Class C share issuance plan was initially delayed when a Massachusetts pension fund and other investors filed a lawsuit claiming it was unfair from a corporate governance perspective. The complaint alleged that the plan was simply a means to guarantee the founders retained voting control over the company and was not in the best interests of shareholders. Google settled the complaint in June.