Shares sold in the share market on behalf of companies are usually classified into different classes. This differentiation helps in outlining the effective rights of each shareholder of the company.
The shares are offered on the basis of the financial stability of a company and also to have public input in company dealings.
Class A vs Class B Shares
The main difference between class A and class B shares is that the voting power given to shareholders of each class is different. In most companies, the greater voting power lies in the hands of class A shareholders, and along with the greater voting rights, they also gain more access to most of the company’s decisions and can voice their opinions without fearing subjugation. But class B shareholders hold barely any advantage in the company’s running as they have just a single vote per shareholder per share.
Class A shares are the most commonly purchased shares in the share market as they are the initial public fundings that the company can accept without diluting the company ownership and their control and power over their company. Almost all companies that put themselves in the share market give out class A shares even if they don’t provide other classes of shares.
Class B shares are not always present in a company as soon as they are part of the share market. This class of shares comes up only after the complete sale of class A shares. Even after that class B shares are considered of the company still requires a financial backup in the form of public money from people who are willing to buy the share in return for periodic profit.
Comparison Table Between Class A and Class B Shares
|Parameters of Comparison
|Class A Shares
|Class B Shares
|Low in general
|Present From the Start in the Companies in the Share Market
|Priority on Dividend
What is Class A Shares?
Class A shares are also called common shares as they are the first and foremost available shares within a company.
When compared to most other classes of shares that the company might hold, class A has the greatest number of voting rights among the company shareholders.
The number of votes per shareholder for each share that they hold can range from 10 to 100 or even greater.
The number of votes depends on the company too. If the company is well known and has a great profit inflow and is quite a major company, then the votes can go even higher.
Even after purchasing a class A stock, the shareholder needs to give a mutual fund that is paid over a period of time.
This doesn’t bring any changes in the profit that is given to the class A shareholders.
Such payments can only create an eventual increase in the profit that the shareholder receives periodically.
The shareholders have greater access to vote on board meetings and prove to be quite useful during board member elections.
They can voice their feelings on the company’s running and point out the flaws in business matters.
In case a shareholder wishes to withdraw his/her share from the company, they can do so without much hassle.
There are no resale issues and since it is a class A share, the value would only increase to double the amount of what the shareholder bought it at.
What is Class B Shares?
Class B shares are more commonly known as preferred stock or preferred shares.
This name comes from a lot more advantage of class B shares even if the purchase amount might be lower.
That need might be financial or even in the decision-making process.
The more the shareholders the greater could be the company’s decision-making input from the holders.
It’s not always that a class B shareholder holds bare minimum voting rights.
Sometimes they may hold votes equal to or greater than that of Class A shareholders.
The two classes of shares that are class A and class B shares are the most common ones sold by companies to enhance the money flow.
An individual can purchase any number of shares that they want depending on their financial capacity.
The difference in the voting power of different share classes is the only reason people tend to buy a major class A share to have their decisions be heard.
Class A shareholder holds great power in the running of the company and has an active role in the company’s functioning.