A Note on Google's Share Distribution

 | Mar 14, 2014 | 2:00 PM EDT
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This is a housekeeping note on Google (GOOG) that pertains to the new share distribution that is upcoming later this month. The company will distribute shares of Class C stock as a dividend to stockholders with a dividend record date of March 27 and dividend payment date of April 2. The new shares will begin trading on April 3. For each Google share owned, we will receive one share of Class A voting stock (symbol will be GOOGL) and one share of Class C shares, which is non-voting (symbol GOOG).

The purpose of the transaction is for the Google founders to maintain voting control. While some see this move as not shareholder-friendly, we don't see this changing anything from a fundamental standpoint, and the 50% split in the share price from the transaction could actually spur additional demand, given the lower price.

The stock has stalled recently on concerns that margins are capped for the near term as the company is considering expanding its fiber platform (for better speed and larger scale). We continue to be impressed by the aggressive nature at the company to find new ways for growth, and in fact we don't buy into the softer margin story, especially since the company just sold off the dragging Motorola Mobility smartphone business. We see incremental opportunities in mobile advertising, display advertising, YouTube monetization and mobile hardware opportunities.

Shares trade at an attractive multiple (21.4x 2014 earnings, 18.1x 2015) given its double-digit top- and bottom-line growth, and it remains our largest position in the fund. 

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