Google’s parent plans to split stocks: Know its effects

Alphabet is Google’s parent company. It plans to split 20 for 1 stocks. How will this affect investors?

Google’s parent plans to split stocks in 20 for 1. Alphabet is the parent company of popular search engine Google. Alphabet has other subsidiaries as well. These are GraphicFuzz, mDialog, Wildfire Interactive, GV etc. Its shares marked an uptick on Tuesday. Splitting of stocks is a common practice among companies. Companies like Apple and Tesla have done this before.

What does it mean to split stocks?

In 2014, Alphabet had split its stocks in 2 for 1. In splitting, one share is divided into multiple shares. There is a reduction in the price of a share. For e.g., a company splits stocks in 2 for 1; the initial price of one share in the company be ₹50; after split, two shares will cost ₹50 in the company.

However, the value of stocks remains the same. The number of shares changes. Now, once again Alphabet plans to split stocks.


Why do companies split stocks?

The main reason behind splitting of stocks is to gain liquidity. Liquidity means the ease of access in purchase and selling of shares. Splitting of shares does not affect the overall capitalisation of a company.


How does it affect investors of Alphabet?

The value of holdings of an investor does not change. The only change is in the number of shares that amount to that value. Lesser price of each share means more liquidity in stock markets. Interested investors will now find it easy to purchase and sell shares in stock market. Even a small investor will find herself in a position to involve with the shares of Alphabet.

The price of one share of Alphabet closed on $2752.88 on Tuesday. Post split-up, the price of each share is expected to be $128. Clearly, $128 is economical to every investor than was the previous value. Thus, as Alphabet that is Google’s parent plans to split stocks, it might receive a welcome.


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