Class A Shares vs. Class C Shares
It seems like a number of high profile companies are
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.
|
On Mon, Jul 4, 2016 at 3:50 PM, Leonard J Delmolino <ldelmolino@comcast.net> wrote:
It seems like a number of high profile companies are
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.
I heard an interesting answer from a person who said since her
positions are too small to influence vote results, she selects
the lower priced of the two shares (Google vs Alphabet,
Berkshire, etc)
Be Well. Irina Sent from my iPad
I think this is an interesting question also Len. We haven't really had to deal with it yet in any of my clubs but we will soon as FB is planning to issue Class C shares.
The share class certainly does seem to have a small impact on stock price. For example the Google class C shares trade at a slightly lower price than the Class A shares.
I don't know if that makes them a better or worse investment though. It seems it may be just another factor to consider when evaluating whether or not to buy or sell the stock.
I did think I heard somewhere (not sure where, unfortunately) that funds have rules where they can only own voting shares. That might make pricing on class A shares more volatile. Again, something to think about, but not necessarily a definitive pro or con when deciding on a purchase.
I'm curious also whether others have thoughts on this topic.
Laurie Frederiksen
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Click here to Subscribe to the Club Cafe email list. Click here to UnsubscribeOn Mon, Jul 4, 2016 at 3:50 PM, Leonard J Delmolino <ldelmolino@comcast.net> wrote:It seems like a number of high profile companies are
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.
Seems to me that voting the modest number of shares owned by most investment clubs will have very little impact on the governance of a company. Is it worth $4 per share to 'have a say at the annual meeting'?
Mike Jones
Wall$treet Wannabees
From: Leonard J Delmolino <ldelmolino@comcast.net>
To: club_cafe@bivio.com
Sent: Monday, July 4, 2016 2:50 PM
Subject: [club_cafe] Class A Shares vs. Class C Shares
It seems like a number of high profile companies are
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.
This Motley Fool article covers the differences between the share classes. In essence, founder and CEO Kevin Plank is avoiding activist issues with this restructuring and it's little different than what Alphabet/Google did previously?
Should I buy the UA or UA-C shares?
Somebody asked Cy Lynch at the national convention why the UA (voting shares) are just assumed to be more valuable when there's actually little perceived value in voting rights for individual investors. His answer? Keep in mind that the covenants and operating limitations for many institutional funds require the ownership of voting shares. So it may be that simple. Supply and demand. The institutional demand for the voting shares (UA) will be perpetually higher.
We've seen this with Alphabet and the differential between the GOOG and GOOGL since the split. As shown in the accompanying chart, the voting shares have maintained a slight premium since inception. So you'll get a lower price for the UA-C shares, but the long term demand will likely be slightly less -- and this premium/discount is likely to hold up.
On Wed, Jul 6, 2016 at 1:58 PM, Mike Jones via bivio.com <user*21595500001@bivio.com> wrote:
Seems to me that voting the modest number of shares owned by most investment clubs will have very little impact on the governance of a company. Is it worth $4 per share to 'have a say at the annual meeting'?Mike JonesWall$treet Wannabees
From: Leonard J Delmolino <ldelmolino@comcast.net>
To: club_cafe@bivio.com
Sent: Monday, July 4, 2016 2:50 PM
Subject: [club_cafe] Class A Shares vs. Class C Shares
It seems like a number of high profile companies are
creating a second class of shares (usually called Class C
shares) that do not have voting rights. Usually this happens
as part of stock split where the new shares created are
Class C shares. Google and more recently Under Armour and
Facebook have created these Class C shares. The new shares
have a different ticker symbol and trade separately from the
Class A shares. The market value of these separate shares
seem to diverge as well (UA Class A shares are around $40 a
share and the Class C shares are around $36 at this time).
My understanding is that the motivation for doing this is to
ensure that the original founders of the company can retain
control of the company
This seems like it makes things more difficult for
investment clubs (or any stock investor). Some members of
our club have suggested that we sell the Class C shares we
own and only buy Class A shares in the future.
We're interested on what other investment clubs think and
how they have approached this issue. Thanks in advance.