It was not that long ago that a vigorous debate raged between investors about which one was a better investment, Google or Apple.
Apple’s stock price went on a tear and the debate died. After Google’s Thursday evening earnings release, the debate as to which company is better will surely reignite.
Dividend Or Stock Split
Apple recently announced a cash dividend and buyback. Some investors were expecting that Google would follow Apple’s lead, but Google has chosen a different path. Google effectively announced a stock split with a twist. Google announced a new class of non-voting stock. The non-voting stock will be distributed as a stock dividend to existing shareholders. Each existing shareholder will receive one share of the non-voting stock for each share held at present.
Investors loved Apple’s stock buyback and dividend, but they are not going to like this new class of stock that Google will distribute. I see the strong probability that the new stock will trade at a discount.
Google founders are focused on long-term and seem immune to any negative reaction on the part of public investors to the new class of stock.
Larry Page and Sergey Brin take pains to explain their position as follows:
We recognize that some people, particularly those who opposed this structure at the start, won’t support this change—and we understand that other companies have been very successful with more traditional governance models….Read more at Forbes
