The Zillow stock split occurred over a year ago but we are still getting questions about it. Similar to Goog vs Googl, investors are confused about $Z vs $ZG and what any of this means.
Zillow acquired rival Trulia and in doing so, created a parent company known as the Zillow Group. Part of this creation of a new entity was the split of the stock.
Stock splits are not the most common thing in the world, however, all companies that participate in stocks splits have the same motives in mind…more control for insiders!
The Zillow stock split was nothing more than a move made by the founders and insiders which allowed more stock to be traded but also to almost guarantee the founders maintain control as long as they want. But while that is all fine and dandy, we just want to know should we invest and trade $Z or should we invest and trade $ZG?
What Did the Zillow Stock Split Do?
Similar to pretty much every stock split ever, when Zillow split its stock into two tradable symbols it also doubled the shares. Doubling the shares allows more shares for people to invest and trade, however, all shares created are not equal.
The Zillow stock split created three types of shares:
|Class A Shares||$ZG||Voting shares|
|Class B Shares||Not publically tradeable||Super-voting shares|
|Class C Shares||$Z||No voting shares|
As always, the company pays employees and acquires other companies with class C shares so they get no voting power. Remember, they created these non-voting shares out of thin air.
At the same time, the class A shares are only publically traded and never given to employees, while the class B shares are not publically traded, have the most voting power and are only held by the founders and a small handful of executives.
This process allows for the founders and insiders to maintain control of the company (this isn’t necessarily a bad thing).
Which Do We Trade?
The truth is we do not care at all about who has insider control of the company. We only care about if we should trade or invest in $Z or $ZG. Between these two, we will choose to invest and trade the symbol that is the more liquid of the two. Why? Because liquidity is the number one more important thing in trading. If we do not trade in the most liquid products, we are losing the ability to get in and our whenever we want and whatever price and size that we want, as well as lose the ability for people to compete for our order and give us the best price possible.
|Class||Symbol||Stock Volume||Stock Notional Value Traded||Options Volume||Options Notional Value Traded|
|Class C Shares||$Z||924,055||$32,545,217.10||950||$3,345,900|
|Class A Shares||$ZG||241,754||$8,417,874.28||132||$459,624|
We can see that the class C shares of $Z are almost 4 times more liquid as the class A shares. This is a rare phenomenon as the market typically pays a slight premium (higher price) for the shares that have voting power. In the case of the Zillow stock split, the class C shares have no voting power so it is strange that they are much more heavily traded.
The only way that something like this is possible is if the founders and insiders own so much of the class A shares that are it impossible for them to ever be outvoted.
The answer is simple, however. If you want to trade or invest in Zillow, trade or invest in $Z.