Home » Google Stock Split-What Are the Implications for Investors?

Google Stock Split-What Are the Implications for Investors?

by Nathan Zachary
Stock Split

Midway through July 2022, Alphabet Inc., the company that owns Google, split its Class A (GOOGL), Class B, and Class C (GOOG) shares 20 for 1.

Later in July, the business also released its second-quarter earnings, which helped the price of GOOGL notch its highest intraday closing gain of the year on July 27. As of August 19, GOOGL and GOOG are currently trading close to $120.

This article will walk you through the reason why Google split its stock, what it means to the investors, and the most recent Alphabet profits and analyst price forecast.

What is a Stock Split?

When a stock split happens, it means that current shareholders will get more shares of the stock in a fixed ratio that the company decides. As a result of the stock split, the price of shares declines due to the predetermined ratio. Stock splits do not affect the aggregate market value of all shares.

Usually, the companies split their stock in ratios 2-for-1 or 3-for-1, this way, the existing shareholder gets additional shares for each share they already own, respectively. Following the stock split, the unit price of the stock will accordingly decrease by a factor of 2 or 3.

In corporate announcements, stock splits are also termed “one-time special stock dividends.” A company can split its stock anytime with the consent of its shareholders.

Google Share Split (20-for-1):

When did Google’s (GOOG) stock split? After the market closure on July 15, owners of Alphabet’s Class A, Class B, and Class C stock each received additional 19 shares.

On February 1, Alphabet declared that the stock split for the company’s Class A, Class B, and Class C shares had been approved and proclaimed by its board of directors.

Google stock split was applauded among investors as Alphabet Class A shares soared over 7.5% to post its greatest intraday gain of 2022.

In the Annual Meeting of Stockholders on June 1, 2022, shareholders approved the plan, and the split date for Google stock was set for July 15.

Alphabet Inc. separated its stocks into three groups. Public markets feature both Class A and Class C shares. Only certain directors and the company’s founders own Class B shares.

The difference between the Class A and Class B shares of the corporation is that the Class B shareholders do not trade their shares in stock markets.

According to reports, Alphabet’s Class B shares have 10 votes each, compared to Class A shares’ single vote.

Why Alphabet Inc. Conducted A Share Split?

A stock split is an interesting phenomenon to increase the stock value in the eyes of individual investors.

A lot of tech companies like Apple Inc., Tesla, Nvidia, and Amazon have announced their stock splits and we have seen their share prices climb.

It is very important to remember that if company’s A shares are more expensive than company B’s does not necessarily mean that A is a better investment. Typically, a company’s Market Capitalization is determined by multiplying the total number of outstanding shares by the unit share price.

The market capitalization of a corporation is unaffected by stock splits. However, a stock split announcement makes the company see a jump in its share price on the news since investors expect greater retail interest.

Google Stock Split-A Boost for Shares?

Stock split announcements typically have a beneficial impact on stock markets. The day after the announcement of its stock split, On February 2, 2022, GOOGL stock price increased by as much as 10% to an all-time high of $3,030. Before the split was announced, Google’s stock price was trading at about $2,750.

The split-adjusted opening price for Alphabet class A stock was $112.64 as trading initiated on July 18. Before the split, Google’s stock was worth $2,255.34 as of the last closing on July 15.

Based on historical valuations of stock splits, the share prices of a corporation normally increase following the announcement of any stock split and decline following its implementation.

Between the announcement and actualization of its 5-for-1 stock split in August 2020, Tesla (TSLA) saw a roughly 80% increase in the price of its shares, from $274 to $498. Following the stock split adjustment, shares dropped by more than 33% over the following five days, reaching $330.

Similar to this, Apple’s (APPL) shares increased by over 34% between the time of the announcement and the split’s implementation in July and August 2020. Within the following 14 trading sessions, stock prices fell by nearly 15%.

Another factor that adds up to the share price increment for Alphabet in 2022 and Apple in 2020 is that the announcement of their stock split coincided with the release of their quarterly earnings that stood outstanding.

Alphabet Inc. Stocks: Analysts Views:

Get the latest analyst ratings, stock forecast, and price targets at Stock Target Advisor.

GOOGL:NSD Alphabet Inc. Class A:

Analysts rate Alphabet Inc. Class A with a consensus ‘Strong Buy’ rating an average stock price target of $139.67 per share over the next 12 months. The last closing price for the stock was $99.97.

Credit Suisse maintains the $134 stock price target and rates it to outperform.

Morgan Stanley lowered the stock price target from $145 to $135.

GOOG:NSD Alphabet Inc. Class C:

Analysts rate Alphabet Inc. Class C with a consensus ‘Strong Buy’ rating and an average stock price target of $144.33 per share over the next 12 months. The last closing price for the stock was $100.78.

Barclays set the stock price target to $150.

STA Research reiterates the Buy rating with a $150 stock price target.

Google Stock Split: What’s Next?

Prior to July 15, 2022, shares of the corporation had only once experienced a stock split.

To operate as a division of the recently formed holding company Alphabet, Google underwent a restructuring in 2015. Larry Page and Sergey Brin, the creators of Google, were appointed CEO and president of Alphabet, respectively.

Google’s Class C shares were not accessible to the general public prior to April 2014. Holders of the 1,998 existing Class A shares (GOOGL) received 1,000 new Class A shares and 998 new Class C shares (GOOG) as part of Google’s 1,998-for-1,000 stock split, which was announced in January 2014.

GOOGL has experienced an almost 300% return since that split. Based on the consensus of 34 stock analysts, Alphabet Inc. stocks are a ‘Strong Buy’.

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