What it is:
Dual-class ownership is a type of stock, each with different privileges.structure in which a company different classes of
How it works/Example:
Let's say Company XYZ liquidation preference over all other share classes, meaning that if the were to , the Class A shareholders would receive before other share classes. Class A shares may also have voting and dividend preferences, meaning that Class A shareholders may receive more votes or a higher dividend per share than Class B or C shareholders.
Companies generally set forth the distinguishing features of their in their corporate charter and bylaws. Class A shares are generally the first in a series of stock classes maintained by a company.
Companies can list dual-class on the New York Stock Exchange, but they cannot reduce the voting rights or existing shares or a new class of superior shares after doing so.
Why it matters:
Companies classify stock might represent ownership in a specific subsidiary, and others might have specific purposes, sell at different prices or pay different dividends. Each class may also have ownership restrictions.
Sometimes companies preserve the power of the company's founding family, certain minority owners or management by assigning special voting rights to specific stock classes. In our example, , which only the Company XYZ founders hold, may be able to vote, but may be nonvoting; alternatively, both classes may be able to vote, but the Class A shares get, say, 10 votes per share and the Class B shares only get one vote per share.
Dual-class may seem unfair, and in some cases it is or it reduces the accountability that managers face. However, it is also important to that certain shareholders may or may not have provided as much or talent as the other .