|
|
|
|
Are Dual-Class Stocks a Mistake for Investors?
(Note: companies that
could be impacted by the content of this article are listed at the base of the
story [desktop version]. This article uses third-party references to provide a
bullish, bearish, and balanced point of view; sources are listed after the
Balanced section.)
Dual-class structured (DCS) stocks are securities with differing voting or dividend rights. They are gaining in popularity as a way for founders to monetize a portion of a company’s value without giving up full voting power. Several large, well-known companies such as Ford, Google, Facebook, and Berkshire Hathaway have DCS structures. The concept was even taken to an extreme by Snap in their IPO when they issued a share class with no voting rights. The New York Stock Exchange banned DCS stocks in 1926 but reinstated the practice during the 1950s in the wake of competition from other exchanges. Recently, the structure is gaining favor in smaller, emerging growth companies. Proponents of DCS stocks argue that the structure allows founders to bring companies public without fear of losing complete control of the company. Opponents of the DCS stocks argue against the structure for the very same reason – the structure does not give individual investors equal opportunity to influence a firm’s performance.