Q: Should I buy GOOG or GOOGL? What is the difference between the two ticker symbols and why aren’t they priced the same?
A: The answer is simple: you can buy either one of them because they are essentially the same.
8/10/2015 Update: Google has just announced a name change so please go here to find out about buying Alphabet stock. For the time being GOOG and GOOGL will remain unchanged.
Google has now split their stock 2 for 1 but it was not the normal split. Usually when a stock splits, you get double the amount of shares you had the day before at half the price. Nothing else changes and the ticker symbol remains the same.
But with this Google split a new ticker symbol has been added and now the company trades under both GOOG and GOOGL. It is very confusing and investors may wonder what the difference is between the two stocks which one they should buy.
Its All About The Voting Rights – Nothing Else
The new stock symbol (GOOGL) comes with voting rights and the old stock symbol (GOOG) does NOT have voting rights at the yearly shareholder meetings. Since you as an individual investor could never influence anything Google does by your vote anyway, whether you own GOOG or GOOGL does not matter.
Since the stock has split, investors have favored the GOOGL shares (voting) over the GOOG shares (non-voting) and the difference in price between the two has varied month to month. At the end of trading on 4/2/2015, GOOGL is priced at $541.31 which is about $6 more than GOOG at $535.53. For several months in 2014 though, the difference was as much as $9. So, what does this mean for new buyers of the stock who are trying to figure out which symbol to buy?
Both stock symbols should theoretically always be within a dollar or two of one another. But as this has not happened, the difference could get bigger or smaller in the future. It is important to know that one of the conditions of the split that Google agreed to was to make up the difference between the shares should one occur.
Google Has Guaranteed To Make Up The Difference
Google agreed to make the shares even if there is still a difference one year after the split (April 2, 2015) in the form of returned cash or additional shares. It will be a one time payment to owners of GOOG to make up the difference between it and the GOOGL shares. The amount of the makeup payment will not be officially determined for at least a month and actual payment to shareholders will not take place until July 2015 in all probability. As long as you were an owner of GOOG on 4/2/2015, you should be eligible for the payment once it happens.
Now that the one year anniversary of Google splitting its shares has come and gone, investors are on their own as far as the prices of the two shares. Google will NOT make up any difference from this point forward. It is possible that GOOG and GOOGL will continue to trade at different valuations depending on how important people think owning the shares that get a vote (GOOGL) is. But since the nature of the stock split makes it virtually impossible for ordinary investors to have any say in the direction of the company, whether you decide to buy GOOG or GOOGL will not matter in the end.