Information on Our New Class of Shares
On January 29, 2014, our Board of Directors approved the issuance of the Class C stock dividend and set March 27, 2014 as the record date. The Class C stock dividend had an April 2, 2014 issuance date, and shares began trading on April 3, 2014.
Mechanics of Issuance
What ticker symbols do the stock classes have?
After the stock dividend was issued:
- the new Class C stock will trade on the NASDAQ Global Select Market under the original symbol GOOG
- Class A stock trades on the NASDAQ Global Select Market under the new symbol GOOGL
- The Class B stock remains unlisted and is not publicly traded.
How were Class C shares allocated to investors who were stockholders on the record date?
Each holder of Class A stock and Class B stock on the record date (March 27, 2014) was entitled to receive shares of the new Class C capital stock on a one-for-one basis. For example, if an investor had 100 shares of Class A (GOOG) stock prior to the dividend issuance, the investor now holds 100 shares of Class A (GOOGL) stock plus 100 shares of Class C (GOOG) stock after the dividend issuance.
If I am a retail investor, do I need to do anything?
On April 2, 2014, each holder of Class A and Class B shares received shares of the new Class C capital stock on a one-for-one basis. No action is necessary.
Impact to Google’s Financial Statements
Do you expect to take any accounting charge as a result of this dividend?
We did not record an accounting charge as a result of the dividend issuance. The issuance of Class C shares resulted in a reduction of retained earnings and an increase in common stock. There was no change to the net equity of Google as a result of the Class C issuance.
Please see below for the impact on our financials regarding the Possible Adjustment Payment to Class C stockholders.
How and when will this start to impact the presentation of your financials? Will your EPS presentation change?
As a result of the issuance of the Class C stock dividend, we have twice as many shares as we did before (since all Class A and Class B shareholders received Class C shares on a one-for-one basis). This resulted in our EPS numbers being approximately halved (for all historical and current periods). In addition, as discussed below, if we are obligated to make a payment to Class C stockholders, EPS for Class C will differ from the EPS for Class A and Class B in the period we make the payment.
Where can I find more information about the terms of the settlement related to the Class C shareholder litigation?
Please see the final stipulation of the settlement that we filed with the SEC here.
How will the Possible Adjustment Payment to Class C Capital Stockholders work?
In accordance with a settlement of litigation involving the authorization to distribute the Class C capital stock, we may be obligated to make a payment (the Possible Adjustment Payment) to holders of the Class C capital stock if, on a volume-weighted average basis, the Class C capital stock trades below the Class A common stock during the first 365 days following the first date the Class C shares traded on NASDAQ (the Lookback Period), payable in cash, Class A common stock, Class C capital stock, or a combination thereof, at the discretion of our Board of Directors.
At the end of the Lookback Period, the Possible Adjustment Payment, if any, will be treated as a dividend to Class C shareholders. This impacts EPS; the payment amounts will be allocated to the numerator for calculating net income per share of Class C capital stock from net income available to shareholders and any remaining undistributed earnings will be allocated on a pro rata basis to Class A and Class B common stock and Class C capital stock based on the number of shares used in the per share computation for each class of stock. This means that in the period we make the Possible Adjustment Payment, the EPS for Class C will be different compared to the EPS for Class A and Class B. For example, let’s assume that in the period we make the Possible Adjustment Payment, we generated $1,000 of net income, and the Possible Adjustment Payment itself is $100. Also, let’s assume that each class of stock has 300 shares outstanding during the period. In order to calculate Class C EPS, the EPS numerator will include the $100 Possible Adjustment Payment plus the pro rata share of the undistributed earnings (i.e. ⅓ of $900 of remaining net income), or $400, divided by the denominator (i.e. Class C shares outstanding), resulting in an EPS of $1.33. For Class A and Class B, EPS is calculated by taking each class’ pro rata share of the undistributed earnings ($300 each) and dividing it by the respective Class A and B shares outstanding, resulting in an EPS of $1.00 each. Please note that this differential in EPS will only happen in the period that we make the Possible Adjustment Payment.
Index Investor FAQs
What are the major indices that include Google stock?
S&P500, Nasdaq 100, Russell 1000 and MSCI Standard indices.
What class of shares will be included in S&P 500, the Nasdaq 100 and other indices?
How will the rebalancing of the S&P 500, the Nasdaq 100, etc. work?
FOR FRENCH SHAREHOLDERS:
Why was French tax withheld when the Class C shares were issued on April 2, 2014 to French individual taxpayers?
Some (but not all) French banks -- which held Google shares for French individual taxpayers -- withheld tax when the Class C shares were issued because the banks misinterpreted the transaction as a taxable dividend paid in shares. Google’s tax advisors believe that the Class C issuance is non-taxable in France.
Will French shareholders be entitled to a refund of the tax that was withheld?
Google shareholders who had French tax withheld on the issuance of Class C shares may seek a refund from the French bank that withheld tax. Alternatively, shareholders may seek a refund from the French tax authorities. Each shareholder should review the process and timing for such a refund with their advisor or tax office.
If shareholders in France wish to seek a refund from their bank or the French tax authorities, what legal grounds should they provide to support their refund claim?
Shareholders seeking a refund for tax withheld on the Class C distribution may reference the following French tax code sections to help clarify that the issuance of the Class C shares was not taxable income but rather an issuance of shares by reduction of retained earnings (an extract of the French tax code sections are provided below in English and original French version; the entire code sections are available on www.legifrance.gouv.fr):
- Section 112 - 7° of the French tax code, which provides that the following “is not taxable income: grant of shares as a result of incorporation of retained earnings into share capital.” “Ne sont pas considérés comme revenus distribués: l'attribution d'actions ou de parts sociales opérée en conséquence de l'incorporation de réserves au capital.”
- Section 121 – 1 of the French tax code, which provides that “for the application of section 120 [which considers as taxable income a list of payments made by foreign companies to their shareholders]…, the incorporation of retained earnings into the share capital does not constitute a taxable event.” “Pour l'application de l'article 120, l'incorporation de réserves par une société étrangère à son capital social ne constitue pas un fait générateur de l'impôt sur le revenu.”
Each shareholder should consult with their tax advisor regarding obtaining a refund.
FOR GERMAN SHAREHOLDERS:
Why was German tax withheld when the Class C shares were issued on April 2, 2014?
Most German banks withheld tax of 26.375% (without church tax) when the Class C shares were issued because they didn’t have sufficient information to determine that the Class C dividend was not a taxable transaction in Germany.
Will German shareholders be entitled to a refund of the tax that was withheld?
Google has approached the relevant parties in Germany to provide them with information in support of Class C being non-taxable. If the parties agree, we expect that the tax withheld will be refunded to German shareholders. We will update this site when we have further information.
Any tax commentary included in this communication was not intended or written to be used, and cannot be used, for the purpose of avoiding tax liabilities and/or penalties. You should consult your own tax advisor regarding tax consequences of the issuance of Class C shares that apply to your particular jurisdiction and circumstances.
Where can I find information related to cost basis allocation between Class C and Class A?
Please see Form 8937 that we filed with the IRS.