Class A Share IPO

Whoever buys a share buys a small stake in a company. An IPO is the day a company sells such shares publicly for the first time. Some companies split their shares for this purpose into two types, called classes. Only one of these types, usually called Class A shares, ends up on the stock exchange and can be bought by anyone. The other type stays with the founders and gives them much more weight in company votes. A Class A share IPO is therefore an IPO in which the public brings in money, but power largely remains in the same old hands.

Raising money without giving up the company

An IPO brings a lot of money into the coffers. At the same time, it creates a problem for the founders. Whoever loses the majority of votes can be outvoted or even dismissed by the new owners. It is precisely this fear that has long kept many successful companies away from the stock exchange.

Two share classes solve this conflict. The founders get fresh capital for factories, research, or acquisitions. Nevertheless, they retain control over strategy. This is considered a reason why companies like Google, Meta, or Snap went public at all.

For investors, this is a double-edged deal. They bear the full risk if the price falls, but have hardly any influence on decisions. Some funds reject such shares for this reason. Others buy them anyway because they believe in the founders.

What distinguishes Class A shares from Class B shares

The difference almost always lies in the voting right. A Class A share typically carries one vote. A Class B share can carry ten or twenty votes, even though it has the same share of profits. A founder with fifteen percent of the shares can thus easily end up with more than half of the votes.

You can imagine it like a club. All members pay the same dues, but the founding members have ten ballots in every vote. The treasury is filled by everyone, but decisions are made by a few. When it comes to the money itself, however, there is usually no difference: dividends are paid out equally per share.

It is also important that the letters don’t mean the same thing everywhere. At some companies, it is precisely the Class A shares that carry strong voting power. There are even Class C shares with no voting rights at all, as with Google’s parent company Alphabet. Anyone investing must therefore check the prospectus to see which class carries which rights. Many companies also build in a sunset clause that automatically ends the special voting right after a few years.

Class A shares in tech news and in the portfolio

The term mostly appears in connection with technology companies. Reports about IPOs of AI companies, chipmakers, or software firms almost always mention the share classes. When it says the founder retains the voting majority after the IPO, this is exactly the model behind it.

You also encounter the difference in your own portfolio. At Alphabet, there are two tradable tickers, GOOGL and GOOG, with almost the same price and different rights. Whoever buys a share via an app often ends up with the public class without giving it much thought.

A common misconception is that Class A shares are the better or more expensive shares. That is not true; the letter says nothing about quality. It only describes which rights are attached to the security. A second misconception: in China, A-shares mean something entirely different, namely mainland shares traded in yuan.