Lesson 5 of 9
A company can also issue various classes of common stock, such as Class A and Class B, with each class having different features. One class may have higher voting power, while the other may have higher dividends. For example, Class A shares may have 1 vote per share and 100% of dividends. Class B shares may have 10 votes per share and zero dividends (usually not publicly traded).
The following is a description of Class A and Class B shares issued by Berkshire Hathaway.
Each Class A common share is entitled to one vote per share. Class B common stock possesses dividend and distribution rights equal to one-fifteen-hundredth (1/1,500) of such rights of Class A common stock. Each Class B common share possesses voting rights equivalent to one-ten-thousandth (1/10,000) of the voting rights of a Class A share. Unless otherwise required under Delaware General Corporation Law, Class A and Class B common shares vote as a single class. Each share of Class A common stock is convertible, at the option of the holder, into 1,500 shares of Class B common stock. Class B common stock is not convertible into Class A common stock.
Till now we discussed about the common and preference shares which are both public securities and are publicly traded. There is also a private market for equity securities where the securities are issued and traded privately. These private securities are issued to institutional investors through private placement and such securities are not traded on stock exchanges. Private equity securities are considered highly illiquid as there is no secondary market for trading.
Learn more about Private Equity