So, you want to invest in Google, you log into to your broker…but realized that Google’s parent company, Alphabet, has two stock tickers; GOOGL and GOOG.
What’s the difference and which should you invest in?
GOOGL vs GOOG: What’s the difference between the two Alphabet tickers?
The main difference between GOOGL and GOOG is GOOGL shares have voting rights while GOOG doesn’t.
Alphabet’s Class A stocks (GOOGL) come with voting rights while the Class C stocks (GOOG) do not. Because of this difference, GOOG tends to trade at a slight discount compared to GOOGL.
Other than voting rights, both classes of stocks are similar – both allow you to own an equal stake in Alphabet.
At this point, you may be wondering:
GOOGL vs GOOG: Which Is a Better Investment?
Let’s take a look at their historical performance to find out:
As you can see, since the creation of Alphabet’s Class C (GOOG) stocks in 2014, both GOOGL and GOOG have performed similarly in terms of their share price.
At the point of writing, GOOG (in orange) had delivered a slightly higher return of 114.74% over the last 5 years as compared to GOOGL (in blue) which delivered 113%.
In terms of price performance, both GOOGL and GOOG are similar and make equally good investments.
Why does Google have 2 stocks?
In 2014, Google split their original stock into two classes – Class A (GOOGL) and Class C (GOOG). Shareholders received a Class C share for every Class A share they owned previously. Although shareholders now have more Alphabet shares on hand, their voting rights remained the same.
So why on earth did Google make such a move?
To retain control.
It is common for founders to lose control slowly as listed companies continue to raise money through additional share offerings and sales of shares. But Alphabet’s founders Larry Page and Sergey Brin wanted to retain majority control.
To avoid giving up control over the company’s direction and decision making, Google decided to create a new class of non-voting shares. This allows the company to issue more shares and raise money while allowing the major shareholders to retain their voting power.
How many class shares does Google have?
Alphabet actually has 3 classes:
- Class A (GOOGL): publicly traded Alphabet shares with voting rights.
- Class B: non-listed, non-traded shares held by founders and insiders. These confer 10x voting power of Class A shares.
- Class C (GOOG): publicly traded Alphabet shares with no voting rights. Alphabet employees are also given Class C (GOOG) as equity compensation.
Are GOOGL shares more valuable than GOOG shares?
Since GOOGL confers voting rights, it is often viewed as being more valuable.
However, it seems most investors do not want to deal with the voting process and GOOG seems to trade a a slightly higher price than the Class A GOOGL stock instead.
That said, the price difference tends to be insignificant.
If you would like to own voting rights and have your voice as a shareholder be heard, then Alphabet’s Class A shares would be a better option for you.
That said, you’ll need to buy a substantial amount of GOOGL in order to actually make a difference when it comes to influencing Alphabet’s corporate policies or business direction.
Activists may band together to purchase GOOGL in large amounts in order to gain enough voting power to influence the management. This is more difficult to execute with Alphabet after the introduction of Class C shares.
Are GOOG shares more liquid than GOOGL shares?
If you’re thinking of investing in Alphabet in order to bet on its long term growth and voting rights don’t matter to you, GOOG shares sound like a good option.
But, what if everyone wants GOOGL shares? Would GOOG shares have a good amount of trading liquidity? Would you be able to trade GOOG easily when you need to?
Let’s look at GOOGL vs GOOG’s average volume (data taken from Yahoo Finance):
- GOOGL: 35,824,979
- GOOG: 28,797,620
Now, let’s compare their trading volume against other top companies in the to get a better idea of whether GOOGL’s and GOOG’s average volume if considered high or low:
- Apple (AAPL): 59,104,364
- Microsoft (MSFT): 29,329,382
- Amazon (AMZN): 59,988,846
Good news, compared to other top tech companies, both GOOGL and GOOG class shares look liquid. You should have to worry about being able to buy or sell either stock when you need to.
If you’ve read till here, you’re probably still unconvinced that both share classes are similar. So…
In what case would investors prefer GOOGL?
If you’re trading options, you would likely prefer to trade GOOGL.
GOOGL is said to have slightly better options volume and liquidity than GOOG, which could mean tighter premium spreads.
However, this may vary depending on the market conditions. You’ll need to check for the latest option pricing and volume via your trading broker.
At the point of writing, the difference between GOOGL and GOOG options isn’t significant:
Alphabet Class A (GOOGL) vs Class C (GOOG): which to buy?
In summary, both GOOGL and GOOG give you equal ownership in Alphabet and have performed similarly in terms of their price history. However, GOOGL does confer voting rights while GOOG doesn’t and hence the former tends to trade at a slightly higher price.
If you’re looking to buy Alphabet’s stock in order to ride on its future growth, both GOOGL and GOOG would offer the same benefits.
However, if you wish to have a say in the company’s policies, then GOOGL would be a better option as it would give you voting rights as a shareholder.
