Google (GOOG) stock fell as much as 4.2 percent Friday morning, one day after the Mountain View search giant announced that it would split its stock and issue a dividend of a new class of shares that do not have voting power.
Google shares jumped almost 2 percent in after-hours trading Thursday, when it announced first-quarter earnings that surpassed analyst expectations on a per-share basis. That bounce quieted down, however, when CEO Larry Page issued a letter saying that the company plans to perform a 2-to-1 stock split.
Google shares descended immediately after the markets opened Friday, as Wall Street suffered widespread losses following two days of gains. Google descended as low as $623.43 after closing Thursday at $651.01; at 9 a.m. Pacific time, Google shares were trading at $629.74, a 3.3 percent decrease, while the Nasdaq composite index was down 1.1 percent.
In layman's terms, the stock structure change will double the shares existing stockholders have, while likely halving the cost of Google stock. Current shareholders of Google will retain their voting power in the company while gaining shares, but future investors -- including employees who receive stock as part of their pay -- will not have a say in the company's
future.
Page explained in his letter that the move was "something many of our investors have long asked us for." He also pointed out that it would keep control of the company with its founders, Page and Sergey Brin, and other important decision makers.
Analysts seemed supportive of the move Thursday, with Global Equities Research analyst Trip Chowdhry calling it "a very smart move ... (that) brings in new investors" and stock analyst and editor of the "Decoding the Wall Street Journal" newsletter Brian Sozzi saying it "is a good thing for existing shareholders."
The stock split will be voted on by existing investors at Google's annual shareholders meeting in June, and the company's chief legal officer, David Drummond, said in Thursday's letter that "We expect it to pass."
Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.
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