Google Shareholder Votes Can Be Worth Less Than Zero

Robert Downey Jr. in Less Than Zero Photograph by 20th Century Fox Film via Everett Collection

What is the worth of a Google shareholder vote?

One correct answer has always been: not much. Since the company went public in 2004, its stock has come in two flavors: Class A shares, which come with one vote apiece; and Class B shares, which come with 10. The latter are held almost entirely by Google’s founders, Larry Page and Sergey Brin, giving them majority control of the company while owning just a fraction of it. If all the Class A shareholders voted against Page and Brin, they would still lose. So it might even be accurate to say that the value of those voting rights is tantamount to nothing.

Today we are learning that the answer can even be: literally less than nothing. Or, to put it differently, an investor will apparently pay you to take the burden of a Google vote off her hands.

Google rejiggered its structure this morning, as a new Class C of shares began trading with no voting rights whatsoever. Typically when a company has voting and nonvoting shares, the former trade at a premium. Currently there’s about a $1 difference between these two kinds of Comcast shares, for example.

Since the new Google shares hit the market, there have been flashes of a reverse premium. At two moments in morning trading, first at about 9:36 a.m. and again at 11:22 a.m., the value of voteless C shares (trading under the ticker symbol GOOG) actually rose above the value of vote-having A shares (trading under GOOGL). The chart below shows the spread; in the bottom panel, look for the two maroon patches:

Google intended for the new issuance to act like a conventional stock split. All Class A holders received an equivalent number of Class C shares, doubling the amount outstanding. To get them to trade in lockstep, Google has agreed to compensate C holders to the tune of $300 million to $7.5 billion, depending on how much the shares diverge. The deal is acting as a rubber band on the two share classes, pulling C higher toward A. You could say it’s working a little too well.