GOOG vs GOOGL – which Alphabet share class should you buy?
Alphabet, the parent company of tech giant Google, is one of the largest companies in the world.
It is a front-runner in artificial intelligence (AI) and part of the so-called ‘Magnificent 7’ stock group. But, if you go to buy Alphabet shares, you’ll notice you have a choice to make.
Alphabet has two stock listings: (NASDAQ:GOOGL) and (NASDAQ:GOOG). The two tickers refer to separate share classes for Alphabet.
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GOOGL refers to Class A shares or common stock, which carry shareholder voting rights – each share you hold grants you one vote whenever a shareholder vote takes place.
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GOOG refers to Class C shares. These confer the same amount of ownership over Alphabet’s equity, but they don’t give you any voting rights.
Because both share classes represent the same level of equity in Alphabet, their prices are similar. However, GOOG tends to trade at a slight discount compared to GOOGL because it doesn’t give you any voting power.
For example, on 18 September GOOGL closed at $349.54 while GOOG closed at $344.41.
While each share class trades separately, they still represent equity in a single company and as such Alphabet’s market capitalisation (market cap) is calculated as the sum of both share classes.
You may sometimes see the two share classes split – for example, a list of S&P 500 stocks or the holdings in a tracker fund will usually list each share class separately.
As of 18 September the iShares Core S&P 500 UCITS ETF (LON:CSP1) lists Alphabet Class A as its fifth-largest holding with 3.1% of the fund, while Alphabet Class C is the seventh-largest with 2.5% of the fund. In reality, though, Alphabet is the third-largest company in the S&P 500 and accounts for a combined 5.6% of the ETF.
Which class of Alphabet stock should you buy?
The answer depends on what you’re hoping to get out of buying Alphabet shares.
If you want to be able to exercise shareholder voting rights then Alphabet’s Class A stock (GOOGL) is the one to buy.
But if you aren’t too fussed about voting – and it’s worth noting that, as Alphabet has a market cap over $4 trillion, your vote is likely to be a miniscule fraction of the total – then GOOG is slightly cheaper, meaning you pay fractionally less for a very similar level of financial return (it has a dividend yield of 0.26% compared to GOOGL’s 0.25% as of 18 September).
In reality, the difference is very small, and capital gains are likely to be similar for both stock classes over the long term (GOOGL gained 148% in the five years to 18 September, compared to GOOG’s 143%), so don’t fret too much over deciding which to buy.
Depending on the investing platform you use, the decision may be made for you as some platforms only offer a single class of Alphabet stock.
Is there a third class of Alphabet stock?
There is a third class of Alphabet stock – Class B. Unlike Class A and Class C shares (GOOGL and GOOG) Class B shares are not traded publicly, meaning you won’t be able to buy them.
Alphabet’s Class B shares are held by company insiders, mostly its senior leadership. They convey ten votes per share – meaning that senior executives hold the majority of control over the decisions the company takes whilst still being able to raise capital in the stock market.
