On Tuesday, Alphabet reported its earnings for the fourth quarter of 2021. In its quarterly earnings statement, the company also did mention that its board approved plans for a 20-for-1 stock split, which pushed the company’s stock more than 9 percent in after-market trading.
Alphabet’s stock split announcement follows less than two years after smartphone maker Apple split its stock, giving three shares for each share that people owned. With its recent announcement, Alphabet’s plan is to split the Class A, Class B and Class C shares of the stock. As seen in its earnings statement, the change will require the approval of shareholders. At the close of business on July 1st, each shareholder will receive on July 15th and 19th, additional shares for each share of the aforementioned class of stock they own.
Back in 2012, Google which already had Class A and Class B shares included a third class of shares with no voting rights. Class A shares carry one vote per share while Class B shares which are held by founders and early investors carry 10 votes. The structure was taken along into Google’s transition to Alphabet in 2015.
The introduction of Class C was described by founders Larry Page and Sergey Brin as “effectively a stock split” adding that they would always act “with the long-term welfare of our company and shareholders in mind”.
Of late, Alphabet’s shares have risen in value. As of Tuesday’s market close shares costs $2,750 each and have doubled in price since May 2020. If the split had happened as of Tuesday’s close, the price of Alphabet’s shares would have gone from $2,752.88 to $137.64, meaning that each shareholder would get 19 additional shares for every one share they owned.
Alphabet’s fourth-quarter earnings surpassed the expectations of analysts in all categories except its YouTube ad revenue category which failed to meet the expectations of analysts.