Google parent company Alphabet announced Tuesday that its board approved plans for a stock split. It will offer shareholders 19 additional shares for every stock they own. The market reacted positively to the news, helping Alphabet stock rise by more than 9% last night.
Alphabet’s Stock Split Follows Apple’s Last Year
Alphabet’s announcement comes a year and a half after the last tech giant made its own stock split. Apple issued three shares for every share its investors owned.
Both Apple and Alphabet are among the few tech companies that pushed their valuation past the trillion-dollar mark. Most of the investors are on the lookout for profitable growth.
In Alphabet’s case, they are planning to execute their stock split across their class A, B, and C shares.
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Each shareholder at the close of business on July 1 will receive 19 additional shares for each share they own. The issued shares will come from the same class as the stock they own.
Google Issued The Third Class of Shares Instead of Undertaking A Stock Split
Earlier in 2012 when Google was Google and not Alphabet, the company added its Class C shares. Previously, they only had two classes of shares.
Class A stock carries one vote per share and is available for general trade. Meanwhile, Class B shares are those held firmly by founding members and early investors. Each Class B share carries 10 votes per share. This stock structure continued until the company rebranded to Alphabet in 2015.
In justifying the addition of Class C, founders Larry Page and Sergei Brin said that it was effectively a stock split. Besides, many shareholders were asking for additional shares. Later in 2014, Google did launch a two-for-one stock split.
Alphabet Hit It Big During Its Previous Quarter
Alphabet’s stock split announcement happened at the same time the company announced its previous quarter’s results. During the fourth quarter, the tech giant beat both earnings and revenue targets easily.
Alphabet posted $30.69 in earnings per share, handily beating expectations of $27.34. Meanwhile, revenue hit $75.33 billion, easily surpassing Wall Street’s targets of $72.17 billion.
Despite the pandemic and inflation, Alphabet managed to post a revenue growth rate of 32%. YouTube advertising revenue hit $8.63 billion, while Google Cloud revenue reached $5.54 billion.
Traffic acquisition costs posted $13.43 billion. All three units beat their target.
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Alphabet Shares Are Becoming Very Expensive
Over the past two years, Alphabet shares continue to outperform the market. Tuesday’s closing price of $2,750 is more than double its 2020 price. Splitting the stock into 20 means a more affordable price for new investors.
Given yesterday’s closing price, each Alphabet share will now cost $128.64 instead of $2,750. Additionally, more people can now afford to buy entire shares instead of settling with fractional shares.
Watch the Yahoo Finance video reporting that Google parent company Alphabet crushes earnings, announces 20-for-1 stock split:
Do you own Alphabet stock? What do you think of its plan to split its stock into 20? Will this make you want to buy or sell?
Tell us what you think. Share your thoughts in the comments section below.