The Google stock split comes as one of the biggest announcements of 2022. Google has been one of the most dominant companies in history, now worth over 1.7trillion. The announced stock split is meant to be 20-1. This has caught the interest of retail investors who previously struggled to access the stock.
What is a stock split?
A stock split occurs when an organization decides to increase its number of shares. Contrary to common belief, a stock split only involves the increment of outstanding shares. This means that while the shares of the company increase by specific multiples, the price of the shares reduces to fit the multiple. Therefore, the value of the company remains essentially unchanged from before the stock split.
Upon the announcement of a stock split by the company, it then gets referred to as a ‘one-time special stock dividend’. This occurs to prevent any confusion between a stock split and the quarterly cash dividend. Therefore, shareholders of the company will merely be allocated more shares for the same value.
For more information on stock splits see here.
Reason behind the Google stock split
The reason most companies decide to introduce a stock split lies in the price of an individual stock. The higher the price per share, a stock split would make it cheaper for retail investors to get a hold of the average 100 shares. As the prices for each individual share would reduce to allocate the value of the company.
Many trading platforms don’t allow buying fractional shares. So when the price of a share is over $1000 for example, the majority of retail investors can’t buy them. On an unrelated note, if you are on a platform like that, seriously consider a portfolio transfer to a platform that does. It’s 2022, and we have multiple trillion-dollar companies out there – you are going to have a hard time if you can’t buy fractional shares.
Google’s parent company, Alphabet, unsurprisingly has one of the most expensive stock prices on the market. With a single share valued at $3000. Thus, unsurprisingly, investors find it increasingly harder to invest in shares in Google. According to Alphabet CFO, Ruth Porat, the stock split would allow more individuals to invest in the company. In her statement, she goes on to say that the goal lies in making Google shares more accessible to everyone.
How will it affect the Google share price?
The value of Google as a company, in and of itself will not necessarily see a change. With the stock split, individual share prices will see a reduction to $150 per share. However, existing shareholders will receive 19 additional shares for every share they already own.
When is the Google stock split?
The announcement of the Google stock split on 02/02/2022 stated that Google would have a 20 for 1 split. This occurs through the issue of a one-time stock dividend. Additionally, this statement comes directly from Google’s parent company, Alphabet. The stock split will come into take effect on the 15th July 2022.
