Google is now Alphabet – What this means for investors, employees, others?

     

  • Google has renamed itself as Alphabet Inc. Larry Page continues to be the CEO of this company and would continue to trade under the symbol GOOG/GOOGL. Alphabet becomes a pure holding company with no operations. There may be come tax advantages given its registered in Delaware but there is no clarity on that front at the moment
  • Dropped the search business in to a separate subsidiary called Google run by Sundar Pichai and therefore perceptually raising Sundar without having to do it in reality. Given the transformation, it is unlikely that the move was warranted by triggered by twitter offering CEO’s position to Sundar Pichai. However ability to retain key talent would have been one of the key factors 
  • Alphabet would also own other subsidiaries such as Nest, Calico etc

To


  • Some people have commented that it would make the company more transparent. That’s BS as this could have been done under the existing structure as well
  • Some believe that this would allow investors to look at each business separately. This is true but current investors of Alphabet (GOOG)  do not have that luxury. They still get lumped with the moonshot bets (Interesting Alpha-Bets – in search of the elusive alpha as in CAPM for those who know)
  • It does however, allow Alphabet to separately monetize and get additional capital into some of these investments or new or existing bets while still retaining control which may be the primary purpose of this. Unlock value of investment in these shares which may not be generating much EBITDA at the moment but are growing and if they were independent operations would be valued individually a lot more than the sum of their parts.
  • Whether new disruptions emerge from Alphabets’ stables will be visible over the next few years.
  • This may also reduce the regulatory criticism of its bargaining power to break up google into smaller companies as they can argue this has already been done through this
  • Restructuring does not create any iota of value. It is what happens after that that does. History would tell whether this was abc.xyz or abc.wtf and therefore its impact on the rest of us.


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By: Kapil

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