We know there is one company named Google…
But why are there two stock tickers (goog vs googl)?
Maybe it is because they want more people to be able to trade Google?
Or maybe it’s something else…
Sit back and relax…we have the answers for you…and you probably won’t be too surprised when you find out the difference between goog vs googl.
GOOG vs GOOGL…How Can This Happen?
We all know the company. The biggest search engine in the world used by billions of people each and every day from God knows how many different devices and different countries. But what happened here with Google is something that is not very surprising.
Let’s take an example. Steven’s stock has 1,000,000 shares, and Steven owns 400,000 and is the largest shareholder by a few hundred thousand shares. When it comes time for there to be a company-wide shareholder vote on something like an acquisition or executive compensation, shareholders are able to vote and their votes are weighted and counted by how many shares they own. This is why stock is equity. The more equity you have, the greater voice you are entitled to.
The risk of not having complete control (the largest percentage of voting shares) of a publically traded company is a big deal and sometimes, the original founders do whatever they can to make sure they always have control of their company. This is exactly what happened when Google split its stock into two stocks. The stock split by Google was nothing more than a move to make the founders (Sergey Brin and Larry Page) alongside with their trusted chairman (Eric Schmidt) retain as much control of Google (soon to be Alphabet) as possible. When they created their new corporate structure and parent company Alphabet, they created three types of stock with different voting powers in order to maintain control.
GOOG vs GOOGL…Are They Equal?
When the parent company Alphabet was created, there were three types of stock created. They created:
- Class A Shares (GOOGL)
- Class B Shares (not publically traded and only held by Sergey Brin, Larry Page, Eric Schmidt, and a small handful of other executives)
- Class C Shares (GOOG)
What makes goog vs googl different, besides share price (we will get to that later) is their shareholders’ ability to vote. Remember, buying shares in a publically traded company is really gaining equity thus voting ability. But maybe not so much in Google…
When it comes to voting here is how the different classes of stock match up:
- Class A Shares (GOOGL): 1 vote
- Class B Shares: 10 votes
- Class C Shares (GOOG): 0 votes
Here is the breakdown of voting power based on shares outstanding:
- Class A Shares (GOOGL): 288,000,000 shares = 288,000,000 votes
- Class B Shares: 52,000,000 shares = 520,000,000 votes
- Class C Shares (GOOG): 0 votes
When it comes down to it, those class B shares that were created when Alphabet was created have roughly 65% of the voting power. And those shares cannot be bought or sold on the public markets and since they are primarily held by Brin, Page, and Schmidt, they will always have the most voting shares.
But how does that combo of insiders make sure to keep it very difficult for anyone else to come to the table with any power? They make acquisitions and pay employees with class C shares (those shares with 0 votes)!
You might be asking “Did Google really just do this to maintain control? Did they do anything here that benefits the public?” The only thing that was done here is that they doubled the number of shares outstanding by creating a stock split. So, while there will never be the problem of not being able to buy enough shares of Google, the stock split does allow for more shares of Google to be purchased although still not moving the needle in terms of voting power.
GOOG vs GOOGL…Which Should We Trade?
While the above is all nice and dandy, we are never going to hold enough shares of a public company to have any voting power. But is there one that is better than the other (goog vs googl)?
Right now goog is trading at $829.08 and googl is trading for $849.08. They also trade with a 99 correlation which means they trade tick for tick. But why is one higher than the other?
We can see goog in the red/green line compared to googl in the pink line. The class A shares are higher than the class C shares because investors pay a slight premium to the idea that class A shares have more voting power than class C shares.
Goog vs googl…the truth is they are both big products and have pretty wide markets. They are both not the greatest products to trade unless you are trading options spreads. Those markets become pennies wide as opposed to the stock bid and ask being dimes wide.
They do trade big notional value, however, which does make them liquid. Here is what they did for stock volume and notional value for Friday, March 3, 2017:
- GOOG: 896,378 shares for $743,169,072.24 notional value
- GOOGL: 1,006,612 shares for $854,694,116.96 notional value
Again, the class A shares have slightly more interest because they are the ones with voting shares.
What about option liquidity? Remember, we can definitely trade spreads here until we are blue in the face as spread markets are pennies wide.
- GOOG: 19,176 contracts for $1,589,843,808 notional value
- GOOGL: 25,182 contracrs for $2,138,153,256 notional value
The Final Verdict…GOOG vs GOOGL?
We don’t really care at all about voting shares because we will never amass enough for it to matter. However, we always care about liquidity and it seems like googl has a decent amount more of liquidity than goog. This just means there is more institutional interest and there will be more competition for your order which means you will get filled at a better price and quicker in googl when compares to the price and speed of goog.