View source for Finance:Class B share

{{Short description|Type of common or preferred stock}}
{{Financial markets}}
In [[Finance:Finance|finance]], a '''Class B share''' or '''Class C share''' is a designation for a [[Finance:Share class|share class]] of a [[Finance:Common stock|common]] or [[Finance:Preferred stock|preferred stock]] that typically has strengthened voting rights or other [[Philosophy:Entitlement|benefits]] compared to a [[Finance:Class A share|Class A share]] that may have been created.<ref>{{Cite book|url=https://books.google.com/books?id=1Wbjhin28MwC&dq=class+B+share&pg=PT198|title=The Business of Value Investing: Six Essential Elements to Buying Companies Like Warren Buffett|last=Gad|first=Sham M.|publisher=John Wiley & Sons|year=2009|isbn=978-0-470-55385-5|location=Hoboken, NJ|pages=214–216|language=en}}</ref> The [[Finance:Capital structure|equity structure]], or how many types of shares are offered, is determined by the corporate [[Finance:Charter|charter]].<ref>{{Cite book|url=https://books.google.com/books?id=NKKxO5LUDY4C&dq=class+B+share&pg=PA52|title=Trading the US Markets: A Comprehensive Guide to Us Markets for European Traders and Investors|last=Pezzutti|first=Paolo|publisher=Harriman House Limited|year=2008|isbn=978-1-905641-05-5|location=Petersfield, UK|page=52|language=en}}</ref>

'''B share''' can also refer to various terms relating to stock classes:

* B share (mainland China), a class of stock on the [[Place:Shanghai|Shanghai]] and Shenzhen stock exchanges<ref>{{Cite book|chapter-url=https://books.google.com/books?id=I6BH-RKYVG4C&dq=B+share&pg=PA435|title=Encyclopedia of Finance|last=He|first=Yan|publisher=Springer Science & Business Media|year=2006|isbn=978-0-387-26284-0|editor-last=Lee|editor-first=Cheng-Few|location=New York|pages=435–436|language=en|chapter=Chapter 15: Chinese A and B Shares|editor-last2=Lee|editor-first2=Alice C.}}</ref>
* B share (NYSE), a class of stock on the [[Company:New York Stock Exchange|New York Stock Exchange]]

Most of the time, Class B shares may have lower repayment priorities in the event a company declares [[Finance:Bankruptcy|bankruptcy]]. Each company’s classes of stock differs and more information is often included in the company’s [[Finance:Prospectus|prospectus]]. If held long term, Class B shares may also be converted to Class A shares.<ref name="hayes2022">{{cite web|url=https://www.investopedia.com/terms/c/classbshares.asp|title=Class B Shares Definition|last=Hayes|first=Adam|website= Investopedia|year= 2022|editor-last=Anderson|editor-first=Somer}}</ref><ref>{{Cite web|url=https://www.lawinsider.com/contracts/fGmW2XG0Fhx|title=Empire State Realty Trust Registration Rights Agreement|website= Law Insider|year=2013}}</ref> There are also different reasons for creating Class B shares within a company—there are, however, similar arrangements which companies seem to use when it comes to equity structure.<ref>{{cite web|url=https://www.investopedia.com/financial-edge/0910/6-basic-financial-ratios-and-what-they-tell-you.aspx|title=6 Basic Financial Ratios and What They Reveal|last=Wilkins|first=Glenn|website= Investopedia|year= 2022|editor-last=Yashina|editor-first=Natalya}}</ref>

Class B common shares can be [[Finance:Investment|invested]] in through mutual funds, or through the public market (stock exchange). There are also Class B shares which are referred to as preferred shares in certain companies. Before investing in the shares, investors will look at different [[Finance:Financial ratio|financial ratio]]s which will help them value the share and aid in the decision of investing in the stock.<ref name="maverick2022">{{cite web|url=https://www.investopedia.com/ask/answers/062215/what-difference-between-class-shares-and-other-common-shares-companys-stock.asp|title=Class A Shares vs. Class B Shares|last=Maverick|first=J.B.|website= Investopedia|year= 2022|editor-last=Brock|editor-first=Thomas}}</ref><ref>{{cite web|url=https://www.thebalance.com/mutual-fund-class-b-shares-good-buy-or-goodbye-2466480#:~:text=shares%20are%20sold.-,Mutual%20fund%20Class%20B%20shares%20may%20be%20one%20class%20of,known%20as%20back%2Dloaded%20shares.|title=What Are Mutual Fund Class B Shares?|last=McGowan|first=Lee|website= The Balance|year= 2022|editor-last=Scott|editor-first=Gordon}}</ref>

==Definition and Application==

A share is defined as an [[Social:Ownership|ownership]] of [[Finance:Equity|equity]] in a corporation. Class B shares are known as a type of classification of [[Finance:Common stock|common stock]] which may have more or fewer voting rights as compared to Class A shares. In the event of [[Finance:Bankruptcy|bankruptcy]], Class B shares may have a lower repayment priority as well.<ref>{{cite web|url=https://www.investopedia.com/terms/s/shares.asp| title=Class B Shares Definition|last=Scott|first=Gordon|website= Investopedia|year= 2021}}</ref>

Class B shares are [[Finance:Financial instrument|financial instrument]]s which represent ownership in a company and proportionate claims on its [[Finance:Asset|asset]]s.<ref name="hayes2022"/> They exist in companies with dual-class structures or with multiple [[Finance:Share class|classes of stock]] with differences in their voting rights attached to each class. The creation of multiple classes are designed to allow [[Organization:Organizational founder|founders]] of the company to maintain ownership over their company as well as to control the company’s direction.<ref name="hayes2022"/><ref>{{cite web|url=https://www.vistra.com/services/incorporation-establishment/uk-company-formation/multiple-share-class-company|title=Multiple Share Class Company|website= Vistra}}</ref> Additionally, having different share classes can be a way for companies to reward early [[Finance:Investor|investor]]s: For example, certain companies may designate Class B [[Finance:Shareholder|shareholder]]s as those who invested with the company before a certain period, thus the investors may enjoy benefits such as higher [[Finance:Dividend|dividend]]s compared to those in other share classes. These details will be illustrated clearly in the company’s [[Social:By-law|bylaws.]]<ref>{{cite web|url=https://www.sofi.com/learn/content/classes-of-stock-shares/|title=Class A vs Class B vs Class C Shares|last=Davies|first=Anna|website=Sofi|year= 2021}}</ref>

Like shares in other share classes, investors can invest in Class B shares through the [[Finance:Stock market|stock market]]. Stock markets are secondary markets where current shareholders can transact with potential investors.<ref>{{cite web|url=https://www.investopedia.com/investing/primary-and-secondary-markets/|title=A Look at Primary and Secondary Markets|last=Beers|first=Brian|website= Investopedia|year= 2021}}</ref> Another way to invest in Class B shares is through [[Finance:Regulation|regulated]] over-the-counter (OTC) exchanges. However, the shares listed there tend to be riskier because they tend to list companies which have failed to meet to more stringent [[Finance:Listing|listing]] criteria of larger [[Finance:Stock exchange|exchanges]]. Additionally, stocks traded OTC usually belong to smaller companies which do not have the [[Social:Financial capital|resources]] to be listed on formal exchanges.<ref>{{cite web|url=https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/over-the-counter-otc/|title=Over-the-Counter (OTC)|website=Corporate Finance Institute}}</ref>

The price of the Class B shares fluctuates perpetually as investors reassess the [[Finance:Intrinsic value|intrinsic value]] of shares.<ref name="hayes2022"/> The decision investors makes as to whether to buy, sell, or hold the stock is based on whether they believe that the stock is [[Finance:Undervalued stock|undervalued]], overvalued, or valued correctly.<ref name="thebalance2022">{{cite web|url=https://www.thebalance.com/how-stock-prices-are-determined-358144|title=How Are Stock Prices Determined|last= Kennon|first= Joshua|website=The Balance|year= 2022|editor-last=Clemon|editor-first=Doretha}}</ref> The price at which someone wishes to buy any share, be it Class B or other classes, is called a [[Finance:Bid price|bid price]].  On the other hand, the price at which someone wishes to sell, is known as an [[Finance:Ask price|ask price]] or offer.<ref name="thebalance2022"/>  For popular stocks, buyers and sellers will be on each side bidding and asking for new prices consistently. The price of the bid will go up if the [[Finance:Demand|demand]] is more than the [[Finance:Supply (economics)|supply]]. On the contrary, if the supply is more than the demand, the bid price will go down.<ref>{{cite web|url=https://www.fool.com/investing/how-to-invest/stocks/how-are-stock-prices-determined/|title=How Are Stock Prices Determined?|last= Price|first= Mike|website=The Motley Fool|year= 2022}}</ref>

==History of Class B Shares==
===Berkshire Hathaway===

[[Company:Berkshire Hathaway|Berkshire Hathaway]] was the first company to introduce 517,500 new Class B shares into the market in 1996.<ref>{{cite web|url=https://www.investopedia.com/terms/b/baby-berkshire.asp|title=Baby Berkshire Definition|last= Kenton|first= Will|website=Investopedia|year= 2022}}</ref> The company demonstrated the differences between Class A and B shares clearly—stating that the Class B common stock has the economic interests equivalent to 1/30th of a Class A common stock,<ref>{{cite web|url=https://www.berkshirehathaway.com/letters/1996.html|title=Chairman's Letter-1996|last= Buffett|first= Warren|website=Berkshire Hathaway Inc.|year= 1996}}</ref>  but has only 1/200th of the voting rights of a [[Finance:Class A share|Class A common stock]]. This meant that each share of Class A stock could initially be converted to 30 shares of Class B stock at the option of the holder.<ref name="Segal 2022">{{cite web|url=https://www.investopedia.com/ask/answers/021615/what-difference-between-berkshire-hathaways-class-and-class-b-shares.asp#:~:text=Berkshire%20Hathaway%20Class%20B%20shares,is%20affordable%20to%20small%20investors|title=How Are Stock Prices Determined?|last= Segal|first= Troy|website=Investopedia|year= 2022|editor-last= Scott|editor-first=Gordon}}</ref>

Warren Buffett, the [[Social:Chief executive officer|CEO]] of Berkshire Hathaway, said at the 1996 annual meeting that the intended purpose of Class B shares was made to match the demand for those shares, and was aimed to prevent false inducements.<ref>{{cite web|url=https://buffett.cnbc.com/video/1996/05/06/why-create-class-b-shares.html|title=Why Create Class B Shares?|last= Buffett|first= Warren|website=Berkshire Hathaway Inc.|year= 1996|time=4:52}}</ref> Additionally, unequal voting shares are created so that owners of the company do not have to give up control, but can still tap into the public equity market for financing.<ref name="mcclure2021">{{cite web|url=https://www.investopedia.com/articles/fundamental/04/092204.asp|title=The Two Sides to Dual-Class Shares|last=McClure|first=Ben|website=Investopedia|year= 2021}}</ref> Furthermore, the price of the new Class B shares attracted many small investors, whilst making Berkshire accessible to the people with modest amounts of capital.<ref>{{cite web|url=https://www.fool.com/investing/2017/06/01/5-key-moments-in-berkshire-hathaway-stock-history.aspx|title=5 Key Moments in Berkshire Hathaway's History|last=Caplinger|first=Dan|website=The Motley Fool|year= 2017}}</ref> Additionally, his intention was to market Class B shares as a type of long-term [[Finance:Investment|investment]] to prevent prices from fluctuating from supply concerns.<ref name="Segal 2022"/> Mr Buffett also refused to a [[Finance:Stock split|stock split]] and claimed that the high price of Class A shares created an intentional [[Social:Barriers to entry|barrier to entry]]. He added that the company wishes to attract investment-oriented shareholders with long-term [[Finance:Time horizon|horizons]].<ref>{{cite web|url= https://www.cnbc.com/2022/03/17/why-warren-buffett-says-berkshire-hathaway-will-never-split-its-stock.html|title=Here’s Why Warren Buffett Says He’ll Never Split the Stock |last=Vega|first=Nicolas|website=CNBC|year= 2022 }}</ref>

Ever since, many companies, such as [[Company:Meta Platforms|Meta]], [[Software:Groupon|Groupon]], and [[Company:Alibaba Group|Alibaba]], have incorporated the dual-class stock structure to ensure owners have control over their company while still being able to reach out to many more potential investors at more attractive share prices.<ref name="mcclure2021"/><ref>{{cite web|url=https://www.investopedia.com/ask/answers/05261|title=Alphabet's GOOG vs. GOOGL: What's the Difference?|website=Investopedia|year= 2022}}</ref>

== Valuation Metrics of Class B Shares ==


There are a few things to take into account before [[Finance:Financial analyst|analysts]] [[Finance:Valuation|value]] the Class B shares of a company. Valuation of the shares must account for all of its economic rights. These rights include: [[Finance:Liquidation|liquidations preference]], dividend rights, conversion rights, redemption rights, participation rights as well as anti-dilution rights.<ref>{{cite web|url=https://www.equitymethods.com/valuation/complex-securities-valuation/equity-allocation/|title=Equity Allocation For Complex Capital Structures |website=Equity Methods }}</ref>  
Like other shares, the intrinsic value of a Class B share helps investors decide if they want to buy a stock. Intrinsic value refers to the fundamental and objective value in the asset. This value is different from the [[Finance:Market value|market value]] of a Class B share, if the market price is below the intrinsic value, it may be a good buy. Otherwise, it may be a good sale.<ref>{{cite web|url= https://www.investopedia.com/articles/basics/12/intrinsic-value.asp|title=What is the Intrinsic Value of a Stock?|last=Alvarez|first=Socrates|website=Investopedia|year= 2022|editor-last=Scott|editor-first=Gordon}}</ref>

Before investing in Class B shares, investors may value the shares using different metrics to find out which stocks the market has undervalued. [[Finance:Financial ratio|Financial ratio]]s are used to analyse a company’s fundamentals. Here are some popular financial metrics used by investors to determine the value of a stock.<ref>{{cite web|url= https://corporatefinanceinstitute.com/resources/knowledge/valuation/types-of-valuation-multiples/|title=Types of Valuation Multiple|website=Corporate Finance Institute|year= 2022}}</ref>

===Price-to-Earnings Ratio (P/E Ratio)===
[[File:P-E Ratio.png|thumb|P/E ratio formula]]
This is the most common way to value a stock. It is represented by the stock price divided by the company’s most recent [[Finance:Earnings per share|earnings per share]] (EPS). The lower the P/E ratio, the more attractive the amount of value for the share.<ref>{{cite web|url= https://www.fool.com/investing/how-to-invest/stocks/how-to-value-stock/|title=The Definitive Guide: How to Value a Stock|last=Hartill|first=Robin|website=The Motley Fool|year= 2022}}</ref>

This is because a high P/E ratio indicates that a stock’s price is expensive whereas a low P/E ratio indicates that the stock price is cheaper compared to its earnings. This ratio is important as it helps determine whether a stock is overvalued or |undervalued.<ref name="Elmerraji 2022">{{cite web|url= https://www.investopedia.com/articles/fundamental-analysis/09/five-must-have-metrics-value-investors.asp |title=Five Must Have Metrics|last=Elmerraji|first=Jones|website=Investopedia|year= 2022}}</ref>

=== Price-to-Book Ratio (P/B Ratio) ===
[[File:P-B ratio.png|thumb|P/B ratio formula]]
The P/B ratio is calculated using a company’s current market value divided by its [[Finance:Book value|book value]]. The [[Finance:Balance sheet|balance sheet]] of the company will inform decision-makers on the company’s book value.<ref>{{cite web|url= https://www.fool.com/investing/how-to-invest/stocks/price-to-book-ratio/|title=Price-to-Book Ratio|last=Bromels|first=John|website=The Motley Fool|year= 2022}}</ref>
This ratio shows investors the difference between the Class B’s market value and the book value of the stock. 
Similar to the P/E ratio, a P/B ratio is generally better if it is lower. A P/B ratio of 0.95, 1 or 1.1 shows that the stock is being traded at what its worth. Hence, investors are more drawn to lower P/B values as it implies that the Class B share is undervalued.<ref name="Elmerraji 2022"/>

=== Debt-to-Equity Ratio (D/E Ratio)===

[[File:D-E Ratio.png|thumb|D/E Ratio Formula]]
The D/E ratio is a [[Finance:Leverage|leverage]] ratio which determines how much debt a company uses to finance its assets.<ref name="Elmerraji 2022"/> It evaluates the company’s financial leverage by dividing total liabilities by shareholder equity. This ratio is used in [[Finance:Corporate finance|corporate finance]] as it measures the degree the company is financing its operations through debt or their own funding. It also gives insight on the ability of shareholder equity to cover outstanding [[Finance:Debt|debt]] in case the business fails.<ref name="Fernando 2022">{{cite web|url= https://www.investopedia.com/terms/d/debtequityratio.asp#:~:text=%2FE)%20Ratio%3F-,The%20debt%2Dto%2Dequity%20(D%2FE)%20ratio,metric%20used%20in%20corporate%20finance.| title=Debt-to-Equity Ratio|last=Fernando|first=Jason|website=Investopedia|year= 2022}}</ref>

A higher risk is often associated with a high D/E ratio. This is because it shows that the company has an aggressive approach when it comes to financing its growth with debt.<ref name="Fernando 2022"/> Additionally, when the D/E ratio gets too high, the [[Finance:Financing cost|cost of borrowing]] is dramatically increased which may eventually drive down the Class B’s share price of the firm. However, it may also be good as it shows that a firm can easily repay its debt obligations and is using leverage to increase the amount of [[Finance:Return on equity|equity returns]].<ref>{{cite web|url=https://corporatefinanceinstitute.com/resources/knowledge/finance/debt-to-equity-ratio-formula/ |title=Debt-Equity Ratio|website=Corporate Finance Institute|year= 2022}}</ref>

==Differences Between Class A and Class B Shares==

[[File:Differences in Share Classes.png|thumb|Difference in the Various Arrangements of Share Classes|600px]]

===General Investments===

Different companies have detailed descriptions of their different classes of stock written in their [[Finance:Prospectus|prospectus]], bylaws, and [[Finance:Charter|charter]].<ref name="hayes2022"/> When there are a few classes of stock in a company, they are usually designated as Class A and Class B – where Class A shares carry more voting rights than Class B shares. The percentage difference in voting rights depends on how the company wishes to structure its stock.<ref name="maverick2022"/> However, companies are not legally obliged to structure their classes this way – there are some companies which offer more voting rights for their Class B shares instead.<ref name="chenfirst2022">{{cite web|url= https://www.investopedia.com/terms/c/classashares.asp  |title=Class A Shares|last=Chenfirst=James|website=Investopedia|year= 2022|editor-last=Scott|editor-first=Gordon}}</ref>

Class B shares are also usually lower in payment priority as compared to Class A shares. When a company goes bankrupt and is forced to be liquidated, Class A shareholders are likely to be paid faster than Class B shareholders.<ref name="maverick2022"/> Class A shareholders also usually have dividend priority, which means that companies distribute dividends to Class A shareholders first.<ref name="chenfirst2022"/>

====Technology Arrangement====
[[File:Google's Dual Class Structure.png|thumb|Difference in Voting Rights of General Technology Companies|300px]]
The technology class arrangement derived its name from its popularity amongst [[Finance:Technology company|technology companies]]. It usually involves insiders of a company having control over their Class B shares. The Class B shares have about 10 times the voting power of Class A shares, and are not traded on public exchanges. These shares are called [[Finance:Super-voting stock|"super-voting shares"]] as they give key company insiders larger control over the company which includes its board and is usually the deciding factor for corporate actions.<ref>{{cite web|url= https://www.investopedia.com/ask/answers/company-multiple-share-classes-super-voting-shares/|title=Multiple Share Classes and Super-Voting Shares |website=Investopedia|year= 2021}}</ref> Hence, the "super-voting shares" are usually not publicly traded.<ref>{{cite web|url= https://www.investopedia.com/articles/fundamental/04/092204.asp|title=The Two Sides of Dual-Class Shares|website=Investopedia|last= McClure|first=Ben|year= 2021}}</ref> One popular example would be the” Google Share Class Structure”.<ref name="chenfirst2022"/> The purpose of this structure is argued to ensure stability of the company and prevent the board and management from feeling short-term pressure, which in turn allows them to focus on long-term goals.<ref>{{cite web|url= https://www.vox.com/technology/2018/11/19/18099011/mark-zuckerberg-facebook-stock-nyt-wsj|title=Mark Zuckerberg is essentially untouchable at Facebook |last=Stewart|first=Emily|website=Vox|year= 2018}}</ref>

====High-Priced Arrangement====
[[File:Berkshire Hathaway's Dual Class Structure as of 2022.png|thumb|Showcases the differences in voting rights between Class A and Class B shares|
300px]]
Some companies value their Class A shares at extremely high prices. Although these Class A shares are publicly owned and traded on the market, they are generally out of reach for the typical investor. In these cases, firms create Class B shares which trade at a mere fraction of the Class A’s share. The Class B share, however, has only a small fraction of voting power. These companies create both share classes in a way where price and voting power are not proportional. One example of this arrangement is the Berkshire Hathaway structure.<ref name="chenfirst2022"/>

===Mutual Funds===

In mutual funds, there are a few differences which set the share classes apart. In terms of fees, Class A share funds charge a “front load”, meaning that a percentage of the purchase amount has to be paid each time shares are bought as commission for the mutual fund’s managers.<ref name="investopedia2022">{{cite web|url=https://www.investopedia.com/ask/answers/061515/how-are-mutual-funds-c-shares-different-and-b-shares.asp#:~:text=Classes%20of%20Mutual%20Fund%20Shares&text=Compared%20to%20Class%20C%20shares,shares%20without%20incurring%20a%20commission|title=How Are a Mutual Funds C Shares Different from A and B Shares|website= Investopedia|year= 2022}}</ref>
These front loads can go up to 5% or even higher. On the other hand, Class B share funds charge a “back-end load”, also known as a “contingent deferred sales charge” (CSDC). This means that when the investor chooses to sell, a percentage of the dollar value of shares sold has to be paid. This back-end load, however, decreases directly proportional to the holding period of the fund,<ref>{{cite web|url=https://www.thebalance.com/is-it-best-to-buy-a-b-or-c-shares-4039035|title=Class A Shares vs. Class B vs. Class C Mutual Fund Shares: Which Should You Choose?|last=Thune|first=Kent|website= The Balance|year= 2022|editor-last=Scott|editor-first=Gordon}}</ref>  and is eventually eliminated.  Class B shares can also automatically be converted to Class A shares after a specific holding period, which is beneficial because Class A shares have a lower yearly [[Finance:Expense ratio|expense ratio]].<ref name="investopedia2021">{{cite web|url=https://www.investopedia.com/articles/mutualfund/05/shareclass.asp|title=The ABCs of Mutual Fund Classes|last=Cook|first=Jennifer|website= Investopedia|year= 2021|editor-last=Stapleton|editor-first=Chip}}</ref>

Class B mutual fund shares are seen to be a good investment if investors have less cash and a longer time horizon.<ref name="investopedia2022"/> To avoid the [[Finance:Investment fund#Fee types|exit fee]], an investor should typically remain in the fund for five to eight years.<ref name="investopedia2021"/>

==Why Companies Create Class B Shares==

Companies choose to create Class B shares and dual-class structures to allow founders, and other corporate insiders to gain almost complete voting control over the company. This is crucial in the early years of a [[Finance:Public company|public company]] because founders are able to execute their own vision without disruption while being able to tap into the public market’s financing, and being able to enjoy the perks of being a public company.<ref>{{cite web|url=https://www.cfainstitute.org/-/media/documents/survey/apac-dual-class-shares-survey-report.ashx#:~:text=The%20advantage%20of%20a%20dual,from%20demands%20of%20ordinary%20shareholders|title=Dual-Class Shares: The Good, The Bad, The Ugly|website= CFA Institute}}</ref><ref>{{cite web|url= https://www.vox.com/technology/2018/11/19/18099011/mark-zuckerberg-facebook-stock-nyt-wsj|title=Mark Zuckerberg is essentially untouchable at Facebook|last=Stewart|first=Emily|website= Vox|year=2018}}</ref> 
Companies choose to mitigate the risk of exposing their governance and assets to the public market by defining different classes of shares to ensure corporate insiders are in control of the voting rights. With Class B shares in a company, authorities are able to assign different rights to different classes of stockholders. They use different classifications to address issues such as voting authority, dividends, as well as rights to capital and assets.<ref>{{cite web|url=https://finance.yahoo.com/news/class-b-c-shares-differ-200010377.html|title=How Class A, B and C Share Classes Differ|last=Reed|first=Eric|website= Yahoo! Finance|year=2019}}</ref>

===Meta===
An example is the company Meta, formerly known as Facebook. Mark Zuckerberg, the CEO of Meta, owns 360 million Class B shares which gives him complete voting power over other shareholders. Additionally, through agreements with other Class B shareholders, he also controls the votes of 32 other million Class B shares. This gives him control of about 392 million Class B shares, amounting to a total of around 90% of Class B shares available.<ref>{{cite web|url=https://www.morningstar.com/articles/1061237/how-facebook-silences-its-investorstitle|title=How Facebook Silences Its Investors|last=Lauricella|first=Tom|website= Morningstar|year= 2021|editor-last=Norton|editor-first=Leslie}}</ref> This amounts to 58% of Meta's vote in total.<ref>{{cite web|url=https://www.forbes.com/sites/betsyatkins/2019/06/07/facebook-strong-arms-investors-who-want-zuckerberg-out/?sh=38e0fcd05901|last=Atkins|first=Betsy|title=Facebook Strong Arms Investors Who Want Zuckerberg Out|year= 2021}}</ref> The ownership of majority of the shares has allowed Zuckerberg to act independently in his decision. One example is his decision to purchase [[Software:Instagram|Instagram]] for US$1 billion, which was made without consulting other Class B shareholders. The company's board has also rejected proposals which aim to weaken Zuckerberg's grip on the company which includes removing the Class B shares in Meta.<ref>{{cite web|url=https://fortune.com/2021/10/26/facebook-papers-whistleblower-haugen-mark-zuckerberg-untouchable/|title=No Matter How Bad the Whistleblowers get, Mark Zuckerberg remains Untouchable |last=Mayer|first=David|website= Fortune|year= 2021}}</ref>

===Alibaba Group===
Another reason for having the founders maintain absolute control of their company is that founders are able to focus on the long-term [[Social:Strategic planning|strategic development]] of their company. The Executive Chairman of Alibaba Group, Jack Ma, has added that his company’s voting structure aims to preserve the firm’s culture whilst avoiding short-term behaviour at the expense of long-term development.<ref>{{cite web|url=https://cbk.bschool.cuhk.edu.hk/alibabas-stock-structure-love-it-or-hate-it/|title=Alibaba's Stock Structure: Love It or Hate It?|last=Ying|first=Fang|website= CUHK Business School|year= 2014}}</ref> The company is  controlled by 28 "partners", including insiders and Ma himself.<ref>{{cite web|url=https://www.reuters.com/article/us-alibaba-structure-idUSBRE98Q01320130927|title=How Jack Ma can Keep a Tight Grip on Alibaba after IPO|last=Oran|first=Olivia|website= Reuters|year= 2013}}</ref> With this structure, Ma's dictatorship blocks the possibility of any contested election. This means that shareholders will not be able to have a say no matter how the equity ownership evolves in the future.<ref>{{cite web|url=https://www8.gsb.columbia.edu/articles/chazen-global-insights/alibaba-dictatorship|title=Alibaba: A Dictatorship?|website= Columbia Business School|year= 2016}}</ref>

===Google LLC===
[[Company:Google|Google]] had similar intentions in releasing their Class B shares to make it harder for the public to influence the company’s strategic decisions through their voting rights. Their company’s Class A stock has one vote per share. On the other hand, Google's Class B stock, which is owned and split amongst CEO Eric Schmidt and founders [[Biography:Larry Page|Larry Page]] and [[Biography:Sergey Brin|Sergey Brin]], was created to have 10 votes per share. Although the three of them only own 31.3% of the total [[Finance:Shares outstanding|outstanding shares]] and 86 million Class B shares, because of the voting ratio, the trio controls 66.2% of Google's voting power.<ref>{{cite web|url=https://www.sec.gov/Archives/edgar/data/0001288776/000119312512160666/d333341dex993.htm|title=Letter From Larry Page and Sergey Brin|last=Drummond|first=David|website= SEC Gov|year= 2012}}</ref>  Google’s CEO said that the purpose of creating Class B shares was to make it easier for management to follow a “long-term, innovation-based growth strategy”.<ref>{{cite web|url=https://www.cnet.com/tech/tech-industry/google-to-defend-dual-class-stock-structure/|title=Google to Defend Dual-Class Structure|last=Mills|first=ELinor|website=CNET|year= 2006}}</ref>

==Conversion of Share Classes==

Shareholders may be able to convert their Class A shares into Class B shares or vice versa depending on what is stated in their bylaws and charter.<ref name="eolusvind.com">{{cite web|url=https://www.eolusvind.com/en/investors/about-the-share/conversion-of-class-a-shares-to-class-b-shares/|title=Conversion of Class A shares to Class B shares|website=Eolus}}</ref> Fees will also be collected by the company which helps draft legal documents for the conversion of shares in addition to other services in the process such as reviewing, drafting and also updating articles.<ref name="Conversion of Shares">{{cite web|url=https://www.companylawclub.co.uk/converting-shares-to-other-classes|title=Conversion of Shares|website=Company Law Club}}</ref>

Reasons for changing share classes include:<ref name="Conversion of Shares"/> 
* Opportunities to change the management of the company
* Dividend allocation and capital distribution
* Alteration of voting rights

In order to change share classes, members of the company must pass an ordinary resolution with the following details:
# Name of shareholder
# Number of shares changed
# Previous class of shares
# New class of shares

Shareholders with Class A shares registered under the name of another nominee must contact the nominee to request a conversion.<ref name="eolusvind.com"/>

After approving the [[Social:Resolution (law)|resolution]], the company will have to submit a form to the regulatory authority in the country, where the process is given full validation. Later on, new [[Finance:Stock certificate|share certificates]] will be issued to the shareholders who have converted their shares. The application is also normally binding and cannot be revoked. 
<ref>{{cite web|url=https://www.dnsassociates.co.uk/blog/changing-of-class-of-shares|title=Changing of Class of Shares|last=Sharma|first=Vrinda|website=DNS Associates|year= 2020}}</ref>

==Shares of Class B Preferred Stock ==

Some companies may refer to their Class B shares as preferred stock. These stocks are described as a hybrid between bonds and common stock as it has features of both securities. These dividends which come with these shares are paid to shareholders before common shareholders when a company goes bankrupt.<ref>{{cite web|url=https://www.investopedia.com/terms/p/preference-shares.asp#:~:text=Preference%20shares%2C%20more%20commonly%20referred,company%20assets%20before%20common%20stockholders.|title=Preference Shares|last=Fernando|first=Jason|website=Investopedia|year= 2022}}</ref><ref>{{cite web|url=https://www.bankrate.com/glossary/p/preferred-stock/|title=Preferred Stock|website=Bankrate}}</ref>    Preferred stockholders tend to have a higher claim on asset distributions or dividends compared to common stockholders. This is because of the higher risk assumed with the shares.<ref name="marquit2022">{{cite web|url= https://www.forbes.com/advisor/investing/what-is-preferred-stock |title=Preferred Stock -- The Best of Bonds and Security in One Equity|last=Marquit|first=Marinda|website=Forbes Advisor|year= 2022}}</ref>  More information on the preferred stock are dependent on the company and written in the company’s bylaws and charter.<ref name="ganti2022">{{cite web|url=  https://www.investopedia.com/terms/p/preferredstock.asp|title=Preferred Stock|last=Ganti|first=Akhilesh|website=Investopedia|year= 2022|editor-last=Silberstein|editor-first=Samantha}}</ref>  
Preferred Class B shares generate income which gets preferential tax treatment, and most companies do not give preferred shareholders voting rights. These shares may also be convertible to a predetermined number of common stock, depending on the company’s bylaws.<ref name="marquit2022"/> Shareholders’ dividends from these stocks usually yield more than common stock and are paid monthly or quarterly.<ref name="ganti2022"/>

When preferred shares are issued, issuers avoid dilution of control as there are limited or no voting rights which come with the shares. Companies can also buy back the preferred stock and if the price is above the par value, investors may receive a profit from the stock.<ref name="marquit2022"/>

==See also==
* [[Company:H share|H share]]
* [[Company:Red chip|Red chip]]
* [[Finance:P chip|P chip]]
* [[Company:S chip|S chip]]
* N share
* [[Finance:L share|L share]]
* [[Finance:G share|G share]]
* [[Finance:China Concepts Stock|China Concepts Stock]]

==References==
{{reflist|colwidth=30em}}

[[Category:Equity securities]]

{{Sourceattribution|Class B share}}