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If you have considered investing in Alphabet, the parent company of Google, you might have already noticed that there are two different stock symbols for Google, i.e. GOOG and GOOGL.
Which one is better? What’s the difference between them? This article will answer these questions for you.
Google was founded in 1998 by Larry Page and Sergey Brin, both of them were Ph.D. students at Stanford University at the time. They started their search engine business in a friend’s garage in Menlo Park, California, raising about a million US dollars as startup capital.
Google was a search engine company when it was founded, its name, “Google,” came from a misspelling of “googol.”
With the development of the internet, the business of Google grew rapidly. Its IPO launched on August 19, 2004, issuing 19.6 million shares at $85 each, starting with a market capitalization of $23 billion. Two years later, in 2006, Google acquired YouTube for $1.65 billion, expanding its video business.
In 2015, as part of restructuring, Alphabet was founded to serve as the holding company for Google and group companies
Beyond the internet businesses, such as search engines, maps, Gmail, etc., Alphabet also reaches out to sectors like self-driving cars, IoT, longevity research (Calico), smart home technology (Nest), high-speed internet (Fiber), etc., and became a complicated organization with diverse business.
This means that Google, as a search engine company, has transformed into a company with diverse businesses, Alphabet. The newly founded Alphabet serves as the holding company for Google and other companies, and Google, succeeding the major internet business like search engine, advertisement, Android and Chrome, became a wholly owned subsidiary under Alphabet, while other ventures for the next generation not yet profitable for Google split and became direct subsidiaries of Alphabet.
This restructuring allowed Google to concentrate on “maximizing returns” and “investing in its future” without facing criticism from shareholders regarding unprofitable research projects. The split subsidiaries are allowed to concentrate on the exploration of the possibilities of technology, technical innovation, and R&D in a long-term perspective, without worrying about the issue of profits.
This restructuring marked a necessary step of evolving toward the next generation.
Originally, the stock symbol of Google was GOOG. In 2014, Google split its stock into Class C shares (GOOG) and Class A shares (GOOGL), with the primary difference of voting rights. GOOG (Class C) shares do not empower their holder with voting rights, while GOOGL shares (Class A) shares do.
The reason for the split was to protect the voting rights of founders and existing shareholders. The shareholder who holds the Class A Shares, GOOGL, also owns the voting rights per share, which is the reason why the price of GOOGL shares is typically slightly higher than GOOG.
Class B shares also exist for Google, but they are only held by the founders of Google, i.e. Larry Page and Sergey Brin, and the CEO, Eric Schmidt. Class B shares come with ten times the voting rights compared to Class A shares, which virtually gives Page and Brin veto power over all the major decisions. If Class B shares were publicly available, their price would far exceed that of other shares.
While deciding between GOOG and GOOGL, consider the following factors.
Voting Rights: If you hope to have the right to speak out in company decisions, GOOGL may be preferable for you, since it includes voting rights.
Price Difference: The price of GOOGL is generally slightly higher than GOOG due to its voting rights. If you don’t care about voting rights, GOOG might be a more economical option.
Long-Term Investment: For long-term investors, the difference between the two may be minor, as they both represent the same company, Alphabet.
As a conclusion, the main difference between GOOG and GOOGL lies in the existence of voting rights. GOOGL includes voting rights and tends to be more expensive, while GOOG does not come with voting rights and is typically cheaper. Before deciding the symbol to invest in, investors should consider their own goals and their needs for voting rights. No matter which symbol you choose, they both offer a way to invest in Alphabet, a diversified technology company.
