Google (GOOG) to Become Alphabet, Stock Soars
Shares of Google Inc. (GOOG) were trading up +35.52 or +5.60 percent to $669.25 per share in Tuesday's premarket after the company announced late yesterday it was creating a company called Alphabet and restructuring as a holding company. Google stock traded as high as $708 per share in yesterday's afterhours session after the announcement and closed at $633.73 per share, down -1.57 or -0.25 percent in Monday's regular trading session.
In a surprise move, Google announced the creation of Alphabet Inc., a conglomerate of Google's companies. The conglomerate will have Google, YouTube and Android mobile software, as well as other Web products in a key role. Other Google ventures included in Alphabet are Google X, Google Ventures, Calico and Google Capital among other subsidiaries.
In a blog post released yesterday afternoon, Larry Page, Google's Chief Executive Officer outlined the plan for the new structure. Page said that Alphabet Inc. will replace Google Inc. as a publicly traded entity. All Google shares will automatically convert into the equivalent number of Alphabet shares and will have the same rights with Google becoming a wholly owned subsidiary of Alphabet.
The new structure will give each Alphabet company the opportunity to develop independently, empowering entrepreneurs and improving transparency and oversight into the company's operations. The improved focus for each company, by having all of Google's ventures under one holding company will allow Google to invest "at the scale of the opportunities and resources we see."
CEO Page noted in the blog post, that, "For Sergey and me this is a very exciting new chapter in the life of Google -- the birth of Alphabet. We liked the name Alphabet because it means a collection of letters that represent language, one of humanity's most important innovations, and is the core of how we index with Google search! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products--the whole point is that Alphabet companies should have independence and develop their own brands."
Larry Page will continue in his role as Chief Executive Officer of Alphabet, with Sergey Brin as President. The new Google subsidiary, which includes Android and Chrome operating systems and YouTube, will be run by Sundar Pichai, formerly in charge of product and engineering for the company's Internet businesses.
Google stock is reflecting the market's enthusiasm for the change, up almost six percent this morning and having traded over the $700 handle yesterday after the close.
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