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Get filing alertsAlphabet raises via mandatory convertible preferred stock, hedges dilution with capped calls
Filed June 5, 2026 · Period ending June 5, 2026 · ~1 min read
Key Changes
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Alphabet issued 335M depositary shares representing in mandatory convertible preferred stock, paying 6.25% dividends quarterly through May 2029 when shares automatically convert to common stock.
Item 1.01 — Entry into a Material Definitive Agreement verify on EDGAR → -
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Common stockholders cannot receive dividends or buybacks unless all preferred dividends are paid first, creating a new payment priority that subordinates existing shareholders.
Item 3.03 — Material Modification to Rights of Security Holders verify on EDGAR → -
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Alphabet entered capped call transactions to limit dilution from conversion, with cap prices at $532.67 for Class A and $527.80 for Class C shares—above these levels, dilution protection diminishes.
Item 1.01 — Entry into a Material Definitive Agreement verify on EDGAR → -
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Underwriters exercised full over-allotment options for 50M additional depositary shares (25M per series), increasing total capital raised by $1,000.00 or 15%.
Item 1.01 — Entry into a Material Definitive Agreement verify on EDGAR → -
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In liquidation, preferred holders receive $1,000 per share plus unpaid dividends before any distribution to common stockholders, creating senior claims on company assets.
Item 3.03 — Material Modification to Rights of Security Holders verify on EDGAR →
Summary
Alphabet completed a massive capital raise through mandatory convertible preferred stock, one of the largest such offerings by a tech company. The company issued two series of preferred shares—Series A converting to Class A common and Series B to Class C—each paying 6.25% annual dividends through May 2029.
At that point, the shares automatically convert to common stock at variable rates based on stock price performance, potentially issuing between 2.25 and 2.84 shares per preferred share. Retail investors should understand three key impacts: First, common stockholders now sit behind preferred holders for dividends and buybacks—Alphabet cannot return cash to common shareholders unless preferred dividends are current.
Second, while the capped call transactions provide dilution protection, that protection caps out around $530 per share; if the stock trades significantly higher by 2029, existing shareholders will still face meaningful dilution. Third, the sheer size of this raise—roughly 2% of Alphabet's market cap—signals either major capital needs or opportunistic financing at attractive rates. Watch Alphabet's use of proceeds in upcoming 10-Q filings and whether the company begins paying the quarterly preferred dividends in cash or stock—stock payments would indicate cash conservation but accelerate common share dilution.
Section-by-Section Diff
Event · Item 1.01 — Entry into a Material Definitive Agreement
Item 1.01 — Entry into a Material Definitive Agreement filed; see Key Changes for terms.
Added in current filing · verify on EDGAR →
On June 2, 2026, Alphabet Inc. (“Alphabet” or the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, and Morgan Stanley & Co. LLC as the representatives of the respective underwriters under such agreement, pursuant to which Alphabet agreed to issue and sell (1) 167,500,000 series A depositary shares (the “Series A Depositary Shares”), each representing a 1/20th interest in a share of 6.25% Series A Mandatory Convertible Preferred Stock, liquidation preference $1,000.00 per share, par value $0.001 per share (the “Series A Preferred Stock” and such offering, the “Series A Depositary Shares Offering”) and (2) 167,500,000 series B depositary shares (the “Series B Depositary Shares” and together with the Series A Depositary Shares, the “Depositary Shares”), each representing a 1/20th interest in a share of 6.25% Series B Mandatory Convertible Preferred Stock, liquidation preference $1,000.00 per share, par value $0.001 per share
Alphabet completed a major capital raise by issuing 167.5 million depositary shares in each of two series of mandatory convertible preferred stock, with a 6.25% dividend rate and $1,000 liquidation preference per underlying preferred share. Each depositary share represents 1/20th of a preferred share, implying $1,000.00 in total proceeds before over-allotments. The offerings closed on June 5, 2026.
Added in current filing · verify on EDGAR →
On June 2, 2026, in connection with the pricing of the respective Depositary Shares Offerings, and on June 3, 2026 in connection with the Underwriters’ exercise of the over-allotment options to purchase additional Depositary Shares, Alphabet entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with one or more of the underwriters or their respective affiliates and/or other financial institutions (the “Option Counterparties”). The Capped Call Transactions entered into in connection with the Series A Depositary Shares Offering (the “Series A Capped Calls”) cover, subject to customary anti-dilution adjustments, the number of shares of Class A common stock, par value $0.001 per share, of the Company (the “Class A Common Stock”), underlying the Series A Preferred Stock, based on the minimum conversion rate of the Series A Preferred Stock.
Alphabet entered into capped call transactions with financial institutions to reduce potential dilution when the mandatory convertible preferred shares convert to common stock. These derivative contracts cover the minimum number of shares that will be issued upon conversion, with separate transactions for Class A and Class C stock.
Added in current filing · verify on EDGAR →
The cap price of the Series A Capped Calls will initially be $532.6704 per share of Class A Common Stock, and the cap price of the Series B Capped Calls will initially be $527.7974 per share of Class C Capital Stock in each case, subject to certain adjustments under the terms of the relevant Capped Call Transactions.
The capped call transactions have specific cap prices above which the dilution protection diminishes: $532.6704 for Class A shares and $527.7974 for Class C shares. These caps mean that if the stock price rises significantly above these levels at conversion, shareholders will still experience some dilution despite the hedging transactions.
Event · Item 3.03 — Material Modification to Rights of Security Holders
Item 3.03 — Material Modification to Rights of Security Holders filed; see Key Changes for terms.
Added in current filing · verify on EDGAR →
On June 4, 2026, the Company filed the Certificates of Designations with the Secretary of State of the State of Delaware to establish the preferences, limitations and relative rights of the respective series of Preferred Stock. The Certificates of Designations became effective upon filing.
Alphabet created two new series of preferred stock (Series A and Series B) by filing certificates with Delaware. These securities have senior rights to common stockholders and will convert to common shares in 2029.
Added in current filing · verify on EDGAR →
Each series of the Preferred Stock will accumulate dividends (which may be paid in cash or, subject to certain limitations, in shares of the Company’s Class A Common Stock or Class C Capital Stock, as applicable or in any combination of cash and shares) (1) at a rate per annum equal to 6.25% on the liquidation preference thereof, with respect to the Series A Depositary Shares and (2) at a rate per annum equal to 6.25% on the liquidation preference thereof, with respect to the Series B Depositary Shares. The liquidation preference of each series of Preferred Stock is $1,000 per share. Dividends on each series of Preferred Stock will be payable when, as and if declared by the Company’s board of directors (or an authorized committee thereof), on February 15, May 15, August 15 and November 15 of each year, beginning on August 15, 2026 and ending on, and including, May 15, 2029.
Both preferred series pay 6.25% annual dividends on a $1,000 liquidation preference, payable quarterly through May 2029. Dividends can be paid in cash or stock at the board's discretion.
Added in current filing · verify on EDGAR →
Unless earlier converted, each outstanding share of Series A Preferred Stock will automatically convert for settlement on or about May 15, 2029, into between 2.2520 and 2.8160 shares of Class A Common Stock (and, correspondingly, each Series A Depositary Share will automatically convert into between 0.1126 and 0.1408 shares of Class A Common Stock), subject to customary anti-dilution adjustments, determined based on the average volume-weighted average price of the Class A Common Stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day prior to May 15, 2029. Unless earlier converted, each outstanding share of Series B Preferred Stock will automatically convert for settlement on or about May 15, 2029, into between 2.2740 and 2.8420 shares of Class C Capital Stock (and, correspondingly, each Series B Depositary Share will automatically convert into between 0.1137 and 0.1421 shares of Class C Capital Stock), subject to customary anti-dilution adjustments, determined based on the average volume-weighted average price of the Class C Capital Stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day prior to May 15, 2029.
On May 15, 2029, the preferred shares automatically convert to common stock at variable rates based on stock price performance. Series A converts to Class A shares and Series B converts to Class C shares, with conversion ratios ranging from minimum to maximum based on 20-day average prices.
Added in current filing · verify on EDGAR →
In addition, in the event of our voluntary or involuntary liquidation, winding-up or dissolution, each holder of Preferred Stock of either series will be entitled to receive a liquidation preference in the amount of $1,000 per share of the Preferred Stock, plus an amount equal to accumulated and unpaid dividends on the shares to, but excluding, the date fixed for liquidation, winding-up or dissolution to be paid out of the Company’s assets available for distribution to the Company’s shareholders, after satisfaction of liabilities to the Company’s creditors and holders of any senior stock and before any payment or distribution is made to holders of junior stock, including the Class A Common Stock and Class C Capital Stock.
If Alphabet liquidates, preferred stockholders get $1,000 per share plus unpaid dividends before common stockholders receive anything. This senior claim protects preferred holders in bankruptcy or dissolution scenarios.
Event · Item 5.03 — Amendments to Articles of Incorporation or Bylaws
Alphabet filed an 8-K referencing amendments to articles of incorporation or bylaws, with details incorporated from Item 3.03.
Added in current filing · verify on EDGAR →
The information set forth under Item 3.03 of this Current Report on Form 8-K is hereby incorporated by reference in this Item 5.03.
Alphabet disclosed amendments to its articles of incorporation or bylaws under Item 5.03, but the substantive details are cross-referenced to Item 3.03 of the same 8-K filing. Without the Item 3.03 content provided, the nature and materiality of the amendments cannot be determined from this disclosure alone.
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Figures/quotes linked to EDGAR · Narrative written by AI · Jun 17, 2026 · How we verify