Shareholders should prepare for a Google stock split later this year and a drop in share value.
The stock split comes after Google settled a shareholder lawsuit about the stock split, and now the tech titan will launch a new class of non-voting shares this year, according to the Associated Press.
The settlement announcement on Monday came just before a Delaware chancery court trial that "threatened to cast an unflattering light on Google co-founders Larry Page and Sergey Brin." The class-action suit by the Brockton Retirement Board in Massachusetts and shareholder, Philip Skidmore, asserted that both founders "engineered" the stock split so that it benefited them while hurting the rest of its shareholders.
The new class of stock, called "C", has no voting power and would be issued for each share of "A" voting stock. With the new "C" structure, Page and Brin would still be able to control the company even while owning only 15 percent of Google's stock combined. The new Class C shares enables Google to give employees stock and using it for financing while not undermining the founders' voting power.
The settlement requires Google to pay Class C owners if it's worth less than the current stock after one year of trading. Investors will receive a fraction of the different either in cash or Google stock if the Class C lags at least 1 percent less than Class A. Google's board of trustees also must conduct a "special review" on if an acquisition is financed with more than 10 million shares of Class C stock.
If the stock split happens, it's likely that the price of Google shares will drop dramatically to reflect a new glut of shares on the market. With that knowledge, it doesn't seem like there's much of a gain short-term for shareholders. However, maybe in the future the stock price may keep up with other existing stock and this may prove to be a moot point, but it's likely that this lawsuit brought the matter to light.
Published at 1:22 PM PST on Jun 18, 2013