Classified Shares

  

Categories: Board of Directors

George Orwell wrote in Animal Farm, “All animals are equal, but some animals are more equal than others.” The same can be said about shareholders in a public company.

The way we find out who is more equal—or has more power over others—can be found in how organizations classify their stock, which falls under the category of complex capital structure.

Classified shares exist when a firm designates its stock into more than one class of common shares. In most situations, we'll see Class A and Class B shares of stock. In the case of Snap (the owner of Snapchat), common shares traded on public exchanges are C shares.

Each class of stock has different benefits, including the right to more votes and different yields.

CEOs of tech companies like Facebook, Alphabet, and Snapchat have moved to maintain control of A Class shares with significant voting rights as a way to defend themselves from takeovers or shareholders ousting them from their positions.

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