A stock split occurs when a company decides to issue additional stock to its shareholders at a specific predetermined ratio. Consequently, the number of shares held by each shareholder will increase while the price of each share will be reduced by the share ratio as well. However, the overall value of the shares and the entire business will remain the same.
In 2022, Google’s parent Alphabet announced plans to do a 20-for-1 stock split of its shares held by existing shareholders. In this post, we will explain what this means, providing a historical context and explaining the impact of this stock split on Google’s stock.
Understanding Google Stock Splits
A stock split is like splitting a single 100 bill into 10 dollar notes. The total amount of money is still the same, but you now have 10 individual notes instead of one. The size of each piece will be determined by the ratio of the split.
In the case of Google split, the company conducted a 20-for-1 split for all three classes of its stock. This means each shareholder with Google stock will get 20 shares for each share they used to have. That’s 19 additional shares for each one they already own after the Google stocks split.
Key Dates and History of Google Stock Splits
Google stock split history goes all the way back to 2014, when the company conducted its first stock split. Prior to this time, Google only had two classes of shares. Class A was publicly traded and had voting powers while Class B were the shares held by the company’s founders and directors. This was not publicly traded and had 10 times more voting power than the Class A shares.
Google’s stock split on 3 April 2014 created a new class of shares (Class C) which was publicly traded but had no voting rights. The split ratio was 1998/1000. This means a Google shareholder with 1000 shares before the split now had 1000 shares of Google Class A shares and 999 shares of Google Class C shares based on the ratio.
Google announced another split on 27 April 2015. This time, the split only applied to the class C stock and it was more of a compensation than a split in the strict traditional sense. Class C shareholders were awarded 2.7455 additional shares for every 1000 they already owned.
The most recent Google stock split occurred on 15 July 2022. It was a 20-for- split and it applied to three share classes. The company’s board of directors announced plans for the split on 1 February 2022 and it was approved by the stockholders on 1 June. This means there have been a total of three Google stock splits within the past decade.
The Impact of Stock Splits on Google Stocks
The purpose of a stock split is to make a company’s stock price more attractive to retail investors, which is a vital source of capital for the company. While a stock split does not directly affect a company’s market capitalization, the increased interest in the stocks due to the lower price per share can cause the share price to rise.
In the case of Google stocks, the shares traded at $112.64 per share after the split on 18 July 2022. Historical analysis shows that the news of a stock split tends to trigger a rise in a company’s share price after the split is announced, followed by a fall after its implementation. For Google stock, the market reacted positively to news of the split, with GOOGL stock jumping by over 7% a day after the split was announced.
Comparison with Apple Stock Split History
The Google stock split came about a year and a half after Apple split its stock. In 2020, the company announced a 4-for-1 split for its shares, giving each stockholder three shares for each share they owned.
A comparison of Apple stock split history with Google stock split history shows that the company has a more frequent history of stock splits compared to Google, with the company making four splits within two decades. Before the split in 2020, Apple’s stock price was about $498.00 per share based on figures from August 31, 2020. However, after the 4-for-1 stock split, the price per share dropped to $124.50.
Benefits of Google Stock Splits for Investors
A stock split means investors will get more shares after a split. This can be beneficial since a reduced price per share means the stock will be more accessible to a wider range of investors. The higher demand for Google stocks leaves some room for potential price growth.
Having more shares in circulation is also one of the benefits of stock split as this leads to increased trading activity. However, investors shouldn’t buy Google stock in the hope that its price will rise after a split. A company’s value (and consequently investor’s dividends) depends on its earnings rather than its stock price.
Frequently Asked Questions About Google Stock Splits
What is a Google stock split?
Google stock split refers to Google’s corporate decision to divide its existing shares into multiple (smaller) shares based on a specific predetermined ratio. The most recent Google splits was in 2022 and the company’s share was divided at a 20-to-1 ratio.
When did Google stock split occur?
Google’s most recent stock split was executed after trading closed on 15 July 2022.
What was Google’s highest stock price before the split?
Google’s stock price before the July 2022 split was approximately $2,255.34.
How does a stock split affect Google stocks?
Google stock news about the split triggered a small rise in stock price as more investors bought in anticipation of the split. However, the stock split itself does not directly affect the underlying value of Google stocks.
What is the history of Google’s stock splits?
Google’s first stock split was on 3 April 2014, when the company issued a 2-for-1 stock split to create the class C share category. The company also issued a stock compensation for its class C shares on 27 April 2015, which awarded 2.7455 shares for every 1000 already owned by an investor. The latest split was on 15 July 2022.
What are the benefits of a Google stock split for investors?
Google’s stock split led to a reduction in the price per share, making the shares more accessible to more investors, especially those on a smaller budget. But for investors that already own Google shares, the total value of their shares remains the same, although they’ll now have more shares than they used to own.
What was Google’s highest stock price before the split?
Google’s highest stock price before the split was approximately $2,255.34, recorded as the closing price on July 15, 2022. The stock split did not impact the company’s overall market value or the value of shares held by individual investors.
How does Google’s stock split compare to Apple’s stock split history?
Apple has a more frequent history of stock splits compared to Google. The latest one was in 2020, which caused the price of Apple’s shares to drop from $498.00 per share to $124.50 after the 4-for-1 stock split.
