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Can anyone explain please, how is the dual-class structure reflected on the stock price? Class B should clearly be more expensive, even though not necessarily 1

by mojuba 19y ago

Can anyone explain please, how is the dual-class structure reflected on the stock price? Class B should clearly be more expensive, even though not necessarily 10 times.

nostrademons 19y ago
If it were public, yeah, but usually class B shares are not tradable. Their whole purpose is to keep ownership in the founding family or founding investors.
- mojuba 19y ago
  Even though not publicly but still tradable, is this correct?
  - nostrademons 19y ago
    I think there may be some conditions for private sales of class B shares, like if a member of the founding family wants out and sells their shares to current management. Not being privy to any folks who have class B shares, I wouldn't know. There's definitely not a liquid market like the public exchanges - it's like selling stock in a private company. Edit: just thought of a public company with both class A and B shares. Berkshire Hathaway (Warren Buffett's company) has class B shares that each have 1/30 the rights of class A shares, except that they have 1/200 the voting rights. Right now, they're trading at almost exactly 1/30 the price of BRK-A, so the market doesn't seem to give much weight to the reduced voting rights. It's worth noting that BRK-B shares were created for a very different reason than the article is about: some mutual fund manager was about to setup a mutual fund that invested only in Berkshire Hathaway but let you invest in chunks of much less than the $100k share price of BRK-A, so Buffett figured that if someone was going to arbitrage the share price, he might as well be the one doing it instead of letting a money manager pocket the liquidity premium.
  - pchristensen 19y ago
    I thought I read in the Google Story (http://www.pchristensen.com/blog/articles/the-google-story-by-david-vise/ http://www.pchristensen.com/blog/articles/the-google-story-b...) that there was a provision that if any of the Class B shares were sold, they would convert on a 1:1 basis to Class A shares.

by mojuba 19y ago

Can anyone explain please, how is the dual-class structure reflected on the stock price? Class B should clearly be more expensive, even though not necessarily 10 times.

nostrademons 19y ago

If it were public, yeah, but usually class B shares are not tradable. Their whole purpose is to keep ownership in the founding family or founding investors.

mojuba 19y ago
Even though not publicly but still tradable, is this correct?
- nostrademons 19y ago
  I think there may be some conditions for private sales of class B shares, like if a member of the founding family wants out and sells their shares to current management. Not being privy to any folks who have class B shares, I wouldn't know. There's definitely not a liquid market like the public exchanges - it's like selling stock in a private company. Edit: just thought of a public company with both class A and B shares. Berkshire Hathaway (Warren Buffett's company) has class B shares that each have 1/30 the rights of class A shares, except that they have 1/200 the voting rights. Right now, they're trading at almost exactly 1/30 the price of BRK-A, so the market doesn't seem to give much weight to the reduced voting rights. It's worth noting that BRK-B shares were created for a very different reason than the article is about: some mutual fund manager was about to setup a mutual fund that invested only in Berkshire Hathaway but let you invest in chunks of much less than the $100k share price of BRK-A, so Buffett figured that if someone was going to arbitrage the share price, he might as well be the one doing it instead of letting a money manager pocket the liquidity premium.
- pchristensen 19y ago
  I thought I read in the Google Story (http://www.pchristensen.com/blog/articles/the-google-story-by-david-vise/ http://www.pchristensen.com/blog/articles/the-google-story-b...) that there was a provision that if any of the Class B shares were sold, they would convert on a 1:1 basis to Class A shares.