Expect Google’s 2 for 1 Stock Split to Push Shares Lower
Google stock is selling off today, Friday April 13 2012, as investors are focusing on some lingering concerns in the company’s business model.
Google’s revenue grew by 24%, which is slower than the growth rates achieved last year and the cost per click — the amount paid by advertisers every time a person clicks on their ad — fell by 12% compared to a quarter ago. This is a steeper drop on ad revenue than the 8% decline Google reported last quarter.
The stock split has also raised concerns that it will ultimately dilute shareholders’ influence. The new shares will be a nonvoting class of stock. The distribution preserves the same level of control for Chief Executive Larry Page, co-founder Sergey Brin and Executive Chairman Eric Schmidt, who collectively hold about 66% of the company’s voting power.
As a result of the split, though, shareholders will have twice as many shares but no additional influence, an issue that can intensify as more Class C shares get added over time — shareholders are generally aggravated their voting power will be diluted.
Google shares are down nearly 3% for 2012, compared to a 17% rise for the NASDAQ Composite for 2012. While Google has underperformed its peers this year, analysts expect even more short-term pain ahead.