Why Some Stock Shares Are Out of Your Reach
Some companies issue multiple share classes as a way to keep decision-making power in the hands of a select few.
Question: What does it mean when a company issues different share classes of its stock? And how do I know which share class to buy?
Answer: Companies whose ownership structures include more than one share class of common stock typically are set up this way to concentrate decision-making power in the hands of a relatively small group of key stakeholders. For example, a company might offer A and B share classes, with owners of each receiving the same dividend payout per share (assuming the company issues a dividend) but with A shares providing 10 times the voting rights, or decision-making power, of B shares. By controlling enough A shares these key individuals effectively have the ability to make decisions without having to persuade those owning less powerful B shares to go along.
Adam Zoll does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.