Following the report of fourth-quarter earnings, the shares of Alphabet surged 7 percent. The Google parent announced a stock split in the ratio of 20:1 similar to what Apple, Tesla and a couple of more tech giants experimented recently and witnessed a surge in stocks.
The stock jump on Tuesday turned positive for the company amid the report of better-than-expected earnings. The quarterly revenue of Alphabet is up by 32 percent at $75.3 billion from a year ago. The 20:1 stock split is one of the largest announcements made by any company and the intention is to split all three share classes.
In recent months, the shares of Alphabet have jumped up and the current price for each unit is more than $2,750 and this is about twice the value since mid-2020.
Approval of stock split is still pending from the shareholders and the process is due this year in July. If things go as announced by the board, the shares will become more accessible to everyday investors.
However, the Wall Street conventional wisdom believes the step may not do much for the company as even though the investors may get more shares, the value of the holdings would remain almost the same. It is not to be mistaken with the value of Alphabet here.
However, the stock split examples of Tesla and Apple teach a lesson that a huge surge in the stock prices could be achieved within weeks and simultaneously jumps up the market value of the company. In a similar fashion, the value of Alphabet may witness a boost.
The gain of Apple was more than $500 billion in a span of just one month following the 4:1 stock split announcement in July 2020 and that of Tesla was over 70 percent over the course of twenty days. Tesla's stock split ratio was 5:1 and it was announced in August 2020.
If Alphabet shareholders approve the split in July, the price of each share may drop to $128.64 and the shareholders may get 19 additional shares against each unit currently owned.
Meanwhile, Sergey Brin and Larry Page, the co-founders of Google, saw their net worth jumping up by a combined $3.5 billion following the stock split announcement, writes Forbes. Brin is currently worth $113.7 billion while Page is at $117.9 billion.
Alphabet was the top-performing Big Tech company in 2021 and its shares jump was 65 percent. It outperformed the 27 percent gain of the S&P 500. Its full-year revenue in the year was $257.6 billion. In 2020, the full-year revenue was $182.5 billion.
The latest earnings of Alphabet reveal growth in several segments and are not just limited to the traditional advertising revenue. YouTube and Google's cloud business are performing better.