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Google splits into GOOG and GOOGL today

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Re: Google splits into GOOG and GOOGL today

#61

Post by jrockway »

donaldc wrote: post #57

Bad news for Google shareholders in the long run. Companies with multiple share classes having different voting rights tend to underperform companies with stock that is one share, one vote. Please note: that doesn't mean Google won't do well, but that on average it's likely to do worse for shareholders than if all stock had the same voting rights. Since someone is sure to ask for a citation, http://irrcinstitute.org/…

Google has had Class A and Class B shares since the beginning; B carrying 10 votes and A carrying 1.

Re: Google splits into GOOG and GOOGL today

#62

Post by nknighthb »

solomatov wrote: post #59
nknighthb wrote: post #58

Earlier quoted context omitted.

Why would it be better to own stock in a company subject to the control of ever-changing third parties whose goals and motivations I cannot know? At least if I bought Google stock (which I never have directly), I'd know my investment would be shepherded by three specific individuals whose characteristics and motivations are at least not entirely mysterious, nor entirely in conflict with my own, until they decide it i…

>Why would it be better to own stock in a company subject to the control of ever-changing third parties whose goals and motivations I cannot know? Actually motivation of the board of a typical is well known: to get as much money as possible. Most of public companies are owned by institutional investor, i.e. mutual, pension, hedge, etc funds.

I'm talking about the shareholders who choose the board, not the board itself.

Institutional investors change their holdings all the time. And many of them are controlled by people I believe should never see the outside of a prison. (And even the ones that aren't, might be tomorrow!)

So again, I ask, why is it better to risk my money in investments this ever-changing cast of characters can control, rather than companies like Google?

Re: Google splits into GOOG and GOOGL today

#63

Post by donaldc »

jrockway wrote: post #61
donaldc wrote: post #57

Bad news for Google shareholders in the long run. Companies with multiple share classes having different voting rights tend to underperform companies with stock that is one share, one vote. Please note: that doesn't mean Google won't do well, but that on average it's likely to do worse for shareholders than if all stock had the same voting rights. Since someone is sure to ask for a citation, http://irrcinstitute.org/…

Google has had Class A and Class B shares since the beginning; B carrying 10 votes and A carrying 1.

Yes, but eventually they'd have issued enough class A shares to make the class B shares less significant. Now Larry and Sergey can keep their majority votes safe forever. In the long run, to the likely detriment of Google shareholders.

Re: Google splits into GOOG and GOOGL today

#64

Post by cbr »

donaldc wrote: post #57

Bad news for Google shareholders in the long run. Companies with multiple share classes having different voting rights tend to underperform companies with stock that is one share, one vote. Please note: that doesn't mean Google won't do well, but that on average it's likely to do worse for shareholders than if all stock had the same voting rights. Since someone is sure to ask for a citation, http://irrcinstitute.org/…

Note that Google already had this, with classes A and B having a 10x difference in voting power.

Though if it's a bad thing for a company, having more of it probably makes things worse.

Re: Google splits into GOOG and GOOGL today

#65

Post by Tuna-Fish »

dirtyaura wrote: post #52
fiatmoney wrote: post #32

Earlier quoted context omitted.

Right. "Ownership" is a really fuzzy thing; in the context of owning shares of a public corporation it gives you the right to be treated equally (in some senses) with other shareholders, standing for shareholder lawsuits alleging breach of fiduciary duty, and most importantly the right to select the board and vote on certain proposals. No voting rights takes away the most important component.

Surely the most important thing of share ownership of public corporation is that you are eligible to future dividends?

Google pays no dividends, and by all the public information they have ever released, they never intend to.

Re: Google splits into GOOG and GOOGL today

#66

Post by donaldc »

cbr wrote: post #64
donaldc wrote: post #57

Bad news for Google shareholders in the long run. Companies with multiple share classes having different voting rights tend to underperform companies with stock that is one share, one vote. Please note: that doesn't mean Google won't do well, but that on average it's likely to do worse for shareholders than if all stock had the same voting rights. Since someone is sure to ask for a citation, http://irrcinstitute.org/…

Note that Google already had this, with classes A and B having a 10x difference in voting power. Though if it's a bad thing for a company, having more of it probably makes things worse.

Exactly.

Re: Google splits into GOOG and GOOGL today

#67

Post by JumpCrisscross »

fiatmoney wrote: post #18

"Ownership" without control gives you precisely nothing, except for perhaps standing in a shareholder lawsuit. A company being unaccountable to its investors should make it unattractive as an investment.

> "Ownership" without control gives you precisely nothing

This statement implies non-voting stock is worthless. That is untrue. There are people willing to pay good money for nonvoting stock.

Imagine a dual-class share company. Class B shares cannot vote. Class A shares can vote - they own 100% of the vote share. But both classes are pari passu in economic terms - if Class A gets a $1 dividend Class B must receive the same. Further, let there be 1 Class A (voting) share and 999,999 Class B (non-voting) shares. Would you believe those 999,999 non-voting shares are worthless?

Both voting and non-voting stock take part in a company's cash flows - their discounted cash flow value is identical. The only time the difference (or "spread") matters is in the event of a proxy fight or takeover, i.e. a contest of control. The spread is a function of the probability that your vote is decisive - that absent your vote there would be a tie - in a meaningful contest of control. Small odds, which is why voting-nonvoting spreads are minor in the United States (I did a thesis on the subject - in Italy these spreads are around 10%).

Re: Google splits into GOOG and GOOGL today

#68

Post by yid »

JumpCrisscross wrote: post #67
fiatmoney wrote: post #18

"Ownership" without control gives you precisely nothing, except for perhaps standing in a shareholder lawsuit. A company being unaccountable to its investors should make it unattractive as an investment.

> "Ownership" without control gives you precisely nothing This statement implies non-voting stock is worthless. That is untrue. There are people willing to pay good money for nonvoting stock. Imagine a dual-class share company. Class B shares cannot vote. Class A shares can vote - they own 100% of the vote share. But both classes are pari passu in economic terms - if Class A gets a $1 dividend Class B must receive th…

Thank you, that was very clear.

> if Class A gets a $1 dividend Class B must receive the same.

Does this mean that companies cannot split into voting and non-voting stock without paying out a dividend?

Re: Google splits into GOOG and GOOGL today

#69

Post by ericd »

donaldc wrote: post #63
jrockway wrote: post #61

Earlier quoted context omitted.

Google has had Class A and Class B shares since the beginning; B carrying 10 votes and A carrying 1.

Yes, but eventually they'd have issued enough class A shares to make the class B shares less significant. Now Larry and Sergey can keep their majority votes safe forever. In the long run, to the likely detriment of Google shareholders.

Says who? I'd much rather have long-viewed leaders running the company than a horde of outsiders looking to maximize short term gain and flip their positions. This seems like great news for long term investors.

Re: Google splits into GOOG and GOOGL today

#70

Post by [deleted] »

yid wrote: post #68
JumpCrisscross wrote: post #67

Earlier quoted context omitted.

> "Ownership" without control gives you precisely nothing This statement implies non-voting stock is worthless. That is untrue. There are people willing to pay good money for nonvoting stock. Imagine a dual-class share company. Class B shares cannot vote. Class A shares can vote - they own 100% of the vote share. But both classes are pari passu in economic terms - if Class A gets a $1 dividend Class B must receive th…

Thank you, that was very clear. > if Class A gets a $1 dividend Class B must receive the same. Does this mean that companies cannot split into voting and non-voting stock without paying out a dividend?

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