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Serious follow-up question regarding US securities laws: If stock class A has zero voting rights, can the stockholders of class B with voting rights unilaterall

by marvin 10y ago

Serious follow-up question regarding US securities laws: If stock class A has zero voting rights, can the stockholders of class B with voting rights unilaterally decide that class A will get no dividends while class B will get the entire company's profits paid out as dividends?

bedhead 10y ago
Yes though it will depend on the bylaws of the company and the state they're in. There are some dual share classes in the US that do have materially different dividend policies in addition to voting rights.
filleokus 10y ago
I had the same question and it seems like that could be the case. I don't really have any reputable source but many sites write about it, like http://www.investorguide.com/article/11166/stock-classes-the-difference-between-common-stock-and-preferred-stock-igu/ http://www.investorguide.com/article/11166/stock-classes-the... Normally Class A has the voting right and Class B has not. But I would also like a clarification on this from somebody that actually knows. The S1 filing for Snap Inc. states: "We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our amended and restated certificate of incorporation must be paid equally to all stockholders." "Equally to all stockholders", does that mean all Class A holders or both A and B holders?
- marvin 10y ago
  Okay, thanks for the info. I was asking more due to the general case; if a stock class has no voting rights and never will receive dividends, it is effectively worthless unless holders of other stock classes voluntarily give away their money (they won't). I am a little puzzled at some of the latest innovations in the US stock markets. I can understand investing in a company that a small group of insiders will always have majority control in, as long as all owners are treated equally wrt. all forms of payouts. I really don't understand why the market would assign value to a stock class with no voting rights and no plausible scenario for returning capital to stockholders.
deleted 10y ago
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by marvin 10y ago

bedhead 10y ago

Yes though it will depend on the bylaws of the company and the state they're in. There are some dual share classes in the US that do have materially different dividend policies in addition to voting rights.

filleokus 10y ago

I had the same question and it seems like that could be the case. I don't really have any reputable source but many sites write about it, like http://www.investorguide.com/article/11166/stock-classes-the-difference-between-common-stock-and-preferred-stock-igu/ http://www.investorguide.com/article/11166/stock-classes-the... Normally Class A has the voting right and Class B has not. But I would also like a clarification on this from somebody that actually knows. The S1 filing for Snap Inc. states: "We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our amended and restated certificate of incorporation must be paid equally to all stockholders." "Equally to all stockholders", does that mean all Class A holders or both A and B holders?

marvin 10y ago
Okay, thanks for the info. I was asking more due to the general case; if a stock class has no voting rights and never will receive dividends, it is effectively worthless unless holders of other stock classes voluntarily give away their money (they won't). I am a little puzzled at some of the latest innovations in the US stock markets. I can understand investing in a company that a small group of insiders will always have majority control in, as long as all owners are treated equally wrt. all forms of payouts. I really don't understand why the market would assign value to a stock class with no voting rights and no plausible scenario for returning capital to stockholders.

deleted 10y ago

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