Class B Shares
What are Class B Shares?
Class B shares are either 1) common stocks or 2) preferred stocks that generally give fewer benefits to shareholders than class A shares.
How Do Class B Shares Work?
For example, Joe purchases stock in company XYZ. If Joe buys class B shares, a single class B share gives him two votes. However, if Joe buys class A shares he receives six votes per share. Class B shares also have lower dividend priority than class A shares.
Why Do Class B Shares Matter?
While class B shares offer shareholders fewer benefits than class A shares if the company issuing the stock is well managed, retail investors needn’t be concerned about the different classes of stock. In most cases, different shares are issued to give the company's managers, insiders and directors a greater degree of power over the company -- and to provide a better defense against such events as hostile takeover attempts. It should also be noted that differences in share class does not affect the average investor’s share of the profits or benefits from the overall success of the company.
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