Alphabet’s GOOG Vs. GOOGL: What’s the Difference?

Alphabet’s GOOG Vs. GOOGLE. Some of you have probably heard of the GOOG and GOOGL terms and wondering what the basic difference is. Here let me give you a guide as I answer your questions.Alphabet’s GOOG Vs. GOOGL: What’s the Difference?

Google parent company Alphabet, Inc., consists of two types of stock which you can purchase. They are

  • GOOG – which is class C shares, and has zero voting rights.
  • And GOOGL – which is class A shares, and has voting rights.

GOOGL Explained

GOOGL is the class A shares, regular shares, which are available to the general public. It gives stockholders the ‘one share – one vote right’. The decision-making votes comprised of executive pay, bonuses, promotions, diversifying, and even the profit-sharing are cast by this group and group B shareholders. For group C shareholders, they do not have any say in the vote irrespective of whether or not the decision could have an impact on their returns.

GOOG Explained

GOOG is class C shares, which are basic shares. Stockholders in these categories do not have the right to vote on executive decisions. Here, the stocks are sold at a cheaper price as compared to class A shares.

To compensate stockholders in the GOOG category for their inability to vote, an agreement holds that at the finish of each year, the shareholders must be compensated if there is a major difference in profits of both shares. Additionally, each time a GOOG share is sold, the company is under obligation to convert a class B share into Class A shares. This group is basically constituted by low-ranking workers in Alphabet who may not need to bother themselves about the executive decisions.

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Class B Shares

There are also class B shares, where the shares have 10 times the value of GOOGL. 90% of class B shares are owned by founders Sergey Brinn and Larry Page. These classes of shares, are not sold out to the general public and are retained for founders and high-ranking officers within the organization. In this category, over 47 million shares have been sold in this category.

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Alphabet’s GOOG Vs. GOOGL: What’s the Difference?

The basic difference between the two is that GOOGL, the stock offers voting power, that gives you a vote in shareholder meetings.

On the other hand, owning a GOOG stock means that you have no vote at all.

Be it as it may, both share classes technically makes you entitled to an equal amount of the company’s earnings. If it happens that Alphabet/Google ever pays a dividend, then both GOOG and GOOGL will pay out an equal amount.

Alphabet’s annual report for 2018, shows that there were 299 million GOOGL and 349 million GOOG shares outstanding.

Another difference is that GOOGL tends to be slightly more expensive than GOOG. This is because GOOGL stock owners have voting rights, which makes the shares cost slightly more than GOOG stock

Howbeit, the price difference is quite tiny and often less than $1, which is under 0.1% of the stock price. It is also a frequent occurrence that GOOG shares temporarily cost more than GOOGL shares.

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What this means is that the market attaches only but a little value on the voting rights that you get with the class A shares.

Which Should You Buy?

As earlier stated, the basic difference between GOOG Vs. GOOGL  is that GOOGL (class A) shares give voting power.

Apart from this obvious reason, both shares are likely to perform the same over time owing to the stock price

If it happens that Alphabet ends up paying a dividend, then both types of stock will pay out the same dollar amount.

Thus if all that matters to you is stock price gain or a possible future dividend, then it really doesn’t matter which you prefer to buy since the little voting power is almost non-existent.

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