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Google Inc. Message Board

  • uggtrader uggtrader Apr 14, 2014 10:39 PM Flag

    Goog and GoogL gap is nothing.

    You can google this story and read this quote below: It means both shares should be trading at same price!
    Buy Goog. Its a no brainer.

    If there is a big spread between the trading prices of the Class A and Class C shares during the first year of trading, Google Inc. will be required to pay an estimated $300 million to $7.5 billion in cash or additional stock to help make up the difference. Google agreed to those terms to settle a class-action settlement alleging the stock split was set up to benefit Page and Brin at the expense of other shareholders.

    Sentiment: Strong Buy

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    • Find the terms of the settlement. it says if gap is about 5%, goog shareholders get compensated in full to 5%. If gap is 1%, then nothing. Anything higher than that, there is a formula for compensation.
      If Comcast is 2%, Google should be under 1% gap considering the settlement and the fact founders control more than 50% anyways and the googl votes mean nothing.

    • I'm confused with the information I found, see below:

      "The settlement will require Google to pay C shareholders if the average trading price of their stock is at least 1 per cent below the A shares through April 2, 2015. That could happen, based on the trading patterns of stocks in similar situations. For instance, Comcast’s nonvoting shares currently trade about 2 per cent below the company’s voting shares. There’s a 7-per-cent spread between Discovery Communication’s voting and nonvoting shares.

      Here’s how Google’s compensation formula will work: If the average gap in trading prices ranges between 1 and 2 per cent, Google will pay C stockholders an amount equal to 20 per cent of the difference. The largest payment will be made if the spread between the A and C prices average 5 per cent or more during the first year of trading."

      The Google’s compensation formula appears to be more complicated and may not make up the 100% gap in price. In addition, it appears there's a maximum payout of 5% of the GOOGL share prices which may not fully make up the price gap if the gap is BIG.


      Sentiment: Hold

      • 1 Reply to bkinwong
      • The real issue is whether there should be a gap anyways. Comcast ceo controls only about 35% of the votes so other voting shares would be worth something but it is a large company that is hard to takeover 126 billion. Discovery is about 26 billion so votes worth something more as controlling parties own about 35% of votes. Would help in takeovers in this case to have more voting shares.

        In the case of Google, it is just too large to take over. In addition, the founders own more than 50% so the votes are more useless than in discovery or Comcast.

        That's why in the article in San Jose Mercury about the shares, basically suggest that Google does not expect a gap;
        Found the quote:

        "Google doesn't expect there to be much difference between the prices of the Class A and Class C stocks because the distinctions between voting and nonvoting categories will be a moot point, given the majority control of Page and Brin. "

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