What are Share Classes?
Share classes represent ownership in the same fund that charge different fees. This can enable shareholders to choose the type of fee structure that best suits their particular needs.
Why Do Stocks Come in Different Classes?
A company’s shareholders own a percentage of that company’s total assets and profits, so these shareholders also have voting rights in proportion to the number of shares each individual owns. Share classes help to make sure that voting rights are protected and stay in specific hands.
What are Class A and Class B Shares?
Companies issue share classes at their own discretion and can define these share classes almost entirely how they’d like, so the values of these shares vary. The most common share classes are:
- Non-Voting Shares will typically come with less ownership control than other types of shares, but they work well for investors who are only interested in financial return.
- Common/Ordinary Shares get one vote per share owned and get ordinary access to dividends and assets.
- Executive Shares come with more ownership control and typically get 100 votes for each owned share. They also receive ordinary access to dividends and assets
- Preferred Shares typically give the shareholder $2 for every $1 distributed to Class A shareholders and have priority distribution for dividends.
- Deferred Shares are shares that usually pay fewer dividends and pay less often than other share classes. They’re also typically worth less than ordinary stocks.