As the title indicates, I've noticed that Class A (GOOGL) shares of Alphabet stock always trade about 1% lower than Class C shares (GOOG). However, I don't understand as to why this is. As of time of writing, Class is is current $97+ whereas Class A is hivering just under $97.
As far as I can tell, there are two good reasons as to why this shouldn't make sense:
GOOGL offers the conventional one share = one voting write whereas GOOG offers no voting writes. This gives GOOGL real world utility and subsequently....from the outside view at least...greater value.
Larry Page and Sergey Brin own about 56% of GOOGL, making it an even more scarce asset and theoretically more valuable.
The only logical reason I can think of is that because Larry and Sergey own over 50% of the voting power, there is little reason to own Class A shares....but that surely cannot mean they are still worth less than shares with no voter rights, can it?
Any wisdom you guys can share on why this might be will be useful, as it's something I've wondered about for a while.
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Google buys back class C shares, so as their buy back programme has expanded the value of C shares has risen disproportionality to Class A shares, and will continue to do so as long as they keep buying back only one side of their share class.
Class C's liquidation preference should be above Class A. And as you mentioned, Class C is better protected. If you don't have any voting right to protect yourself, you must have more contractual rights to protect yourself. So security concern is the reason.
This seems indicate that the voting right for each share is less worthy than liquidation preference, at least for this time.
With some googling you could find the top results saying that the bankruptcy probability of GOOG is 1.0% or 2.0%, which is significantly lower than the bankruptcy probability of an average US listed company. GOOGL trades about 0.2%-0.3% higher than GOOG, which seems be taking account of the 1.0% bankruptcy risk. Additionally, during the COVID, the bankruptcy risk of many firms have been increased.
2,031 (GOOG) vs 2,015 (GOOGL)
GOOG is Class C and GOOGL is Class A. Not the other way around. I double checked.
It's been like this for almost a year now for no reason whatsoever that I can find.
GOOGL should be worth more than GOOG because it offers voting rights in addition to the exact equity as GOOG, yet the market is saying the opposite.
PS I posted about this in few non-serious couple months back, and the number one response I got was confusion thinking I mixed them up. No, I did not. I thought by now they would have been equalized, but nop, it's still the same, so I am trying r/stocks this time.
Disclaimer: I don't have any Alphabet stock or enough liquidity to benefit from this.
Hey Guys!
Happy Good Friday, as we all know the markets are closed, but I couldn't stop myself looking at potential new opportunities for investments. Upon my search I discovered that Alphabet Inc. (Google) Class A ($1205.03) is actually cheaper than its Class C ($1212.56).
I understand that Class A & B are targeted more toward long term investors and C classes are for those who don't have as much money such as myself but why would class C be more expensive? Could anyone shed some light on this as I'm new to the trading scene and keen to learn!
Cheers Dan.
The only difference between A and C is that C has no voting rights while A does. As such A should always carry a small premium. The fact that it doesn't here is an artifact of inefficient pricing.
Exactly my question. Unless I'm missing something shouldn't somebody just short the class c stocks and buy a? I also thought a was strictly superior because the only difference is that a has voting rights
Here's the current prices. The difference is small but Class C is a bit more expensive. If anything, I would expect Class A to be always (very slightly) more expensive since it has voting rights.
At this point in the company’s timeline Class A voting barely matters because Page and Brin control more than 50% of all votes through their Class B shares.
But yes I’d agree that all else being equal A would be worth more than C
Short story is that GOOG does NOT include voting and GOOGL does.
Longer story is that the founders of Google wanted to be sure to retain control. While being able to use stock incentives with employees, etc.
So they created a class where there is no voting so their is not dilution of their voting.
This way the founders retain control and can never have the Steve Jobs situation. Where he was fired.
Personally I love this. I do NOT want the founders able to be fired. If I am unhappy I sell the shares. Everything is completely in my control.
It also means you can have things like self driving cars. Where Google has been at it for over a decade and spent billions without any return. I want that to be able to happen.
In the end these founders have built a company that was the fastest in history to a trillion dollar cap and did it over 1000 days faster than Amazon.
Right now Google is a trillion dollar company that is also growing the top line at ~20%. Plus the most cash rich company on the planet.
I've long held both and when would add to my position, would do so in GOOGL. Fast forward a few years and for many recent years, GOOG (Class C) would sell at a premium, presumably because stock buybacks would be done on their Class C shares, and the value of a "vote" you get in GOOGL Class A was not of any value.
However, today, GOOGL has closed at a premium to GOOG (13 cents). Is this somehow related to the BRK disclosure of their investment in Alphabet? Is there suddenly a larger value being ascribed to the "vote" in GOOGL?