Dual Class Stock
Dual Class Stock is when the company issues two categories of shares. The dual-class equity structure can consist of A and B shares, for example.. They can also vary in terms of voting rights and dividend payments.
What is Dual class stock?
Dual class shares are different types of shares issued by one company.. Such shares may consist of two or more categories of shares and may vary in terms of voting rights and dividend payments.
When multiple classes of shares are issued, one category is usually offered to the general individual.. Another category is offered to the company’s founders, executives and family. The category submitted to the general public often has limited or no voting rights. While the category available to founders and executives has greater voting power and often provides majority control over the company.
Dual class shares are also designed to give specific shareholders control over voting. Equity classes with unequal voting shares may be created to satisfy owners who do not want to relinquish control, but want the public equity market to provide financing.
Also, so-called super voting stocks are often not traded publicly, and the founders and their families often own controlling groups of shares within the company. But the opposite could be true, so investors should thoroughly examine the details of the company’s stock classes in case the company owns more than one equity class.
Examples of double class shares
Google affiliate Alphabet is the most famous example of double stock classes.. When it was listed in 2004, that company revealed two categories of shares in its offer. The first category of shares was also reserved for ordinary investors and had one vote per share. The second category of shares was reserved for founders and executives and had 10 times the votes of “common” shares.
Many investors were also frustrated with this IPO, given that Google generated significant market capital among the world’s top 30 companies.
As later, the company added a third class of shares, which were without voting rights.
Other examples of companies with dual equity categories are Meta (formerly Facebook), Zynga, Groupon, and Alibaba.
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