If you follow Alphabet, the parent company of Google, you might notice it has two different stock tickers: Google (NASDAQ:GOOG) and Google A (NASDAQ:GOOGL). What's the difference? Which one is better to buy?
The main reason for the existence of GOOG and GOOGL stocks is actually related to Google's voting rights. Generally speaking, shareholders have the right to vote on important issues presented to the company's board of directors, and these issues can affect the way the business operates.
To ensure that the founders can retain control of the company, Google divided its publicly traded stocks into two classes: Class A shares (GOOGL) and Class C shares (GOOG). The strategy behind this move is quite simple: owners of GOOGL shares have one vote per share, while owners of GOOG have no voting rights. This is why GOOGL shares are usually a bit more expensive than GOOG shares.
In addition, Royal Dutch Shell, which is listed on the London Stock Exchange, also has two different stock codes. These stocks have the same economic rights, but different tax restrictions affect their cash dividends. Class A $(RDS.A)$ has tax restrictions, is regulated by the Netherlands, and is subject to Dutch dividend withholding tax (15%), with cash dividends paid in euros. Class B $(RDS.B)$, on the other hand, has tax restrictions regulated by the UK and is not subject to any withholding tax. The cash dividend for B shares is paid in pounds.
When investing in stocks, if you find a stock with two codes, you must check the reasons behind the split and their differences to avoid unnecessary losses. In the stock market, this phenomenon involves aspects such as corporate governance, market rules, and investor choices, and investors should conduct a comprehensive analysis and consider carefully.
- Stock Category Differences
The most common reason is that the company has issued different categories of stocks. As mentioned above, Alphabet has two types of stocks: Class A (GOOGL) and Class C (GOOG). Holders of Class A stocks have voting rights, while Class C stocks do not. This design allows the company's founders and core team to raise funds without diluting control.
- Exchange Differences
Different stock exchanges may assign different codes to the same company's stocks. This situation is particularly common between the Shanghai Stock Exchange and the Shenzhen Stock Exchange in China. For example, certain index or fund products may have different codes on the two exchanges to avoid confusion.
- Special Fund Products
For fund products, especially Exchange Traded Funds (ETFs) and Listed Open-End Funds (LOFs), there may be two sets of coding systems. One set is for bank sales channels, and the other is for securities company trading systems. This distinction helps investors to identify and trade fund products according to different purchase channels.
- Market Code Differentiation
When ETFs are listed on multiple markets, they may use different codes according to the characteristics and rules of different markets. This facilitates investors to identify and trade the same ETF product in different markets.
- Historical Reasons
In some cases, a company's stock may have two codes due to historical reasons. Over time and with market development, some old coding systems may still be in use, especially in markets in different regions or countries.
- Investor Choice
Finally, investor preferences and choices are also one of the reasons why a stock has two codes. For example, some investors may prefer to buy stocks without voting rights because they are usually cheaper, while others are willing to pay a higher price for stocks with voting rights. Therefore, companies set up two types of codes specifically for investor selection.
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