Class A Shares

A share is a small stake in a company. Whoever owns one is among its owners and gets to vote on important decisions. However, some companies don’t just issue one type of share, but several. These types are called classes and are distinguished by letters. Class A shares are the shares of Class A. What exactly sets them apart from Class B or C is decided by each company itself. Usually it comes down to the question of how many votes a single share carries in a ballot.

Why founders want to retain control

Taking a company public means selling shares to outsiders. That usually also means giving up power. Whoever holds the majority of votes can replace the leadership or sell the company. This is exactly what many founders fear. Multiple share classes are their solution to this problem.

The principle is simple. The founders keep a class with many votes per share. On the stock exchange, they sell another class with few or no votes at all. This way, they raise money without losing control. At Alphabet, Google's parent company, the founders held the majority of votes for years through a special class, even though they owned only a small portion of the company.

For investors, this is a double-edged sword. On one hand, stable leadership can think long-term instead of chasing quick quarterly results. On the other hand, ordinary shareholders cannot vote out poor management. Many fund companies openly criticize such structures for this reason.

What the letters mean

There is no general rule for what A, B, or C means. The letter is merely a label from the company’s articles of association. At Meta, for example, Class A shares are the freely tradable shares with one vote. Class B shares are held by Mark Zuckerberg and confidants and carry ten votes. At Berkshire Hathaway, it’s thought of exactly the other way around: there, the Class A share is the expensive original share with full voting rights, while the Class B share is a cheaper variant with significantly reduced influence.

A comparison helps with understanding. Imagine a sports club in which founding members have ten votes and new members one each. Everyone pays the same dues and receives the same benefits. But when it comes to electing the board, the small group of founders effectively decides. That’s exactly how a structure with multiple share classes works.

It’s important to distinguish this from the dividend, i.e., the distributed share of profit. That is usually the same for both classes. The difference almost always lies in voting rights, not in money. Nevertheless, the classes often trade at slightly different prices on the stock exchange, because influence and tradability carry their own price.

Where you’ll notice the classes among tech stocks

Anyone searching for Alphabet at a broker will find two listings: GOOGL and GOOG. These aren’t two companies, but two classes of the same company. GOOGL carries one vote per share, GOOG none at all. The prices are almost always very close to each other. Anyone unaware of this is puzzled by the double hit when buying.

This topic also comes up regularly in the news. When it’s reported that a founder controls their company despite a small stake, a multi-class structure is almost always behind it. Especially many US tech companies have gone public this way. In Germany, this is rarer, because corporate law long banned multiple voting rights and has only allowed them again, in limited form, since 2023.

For you as a reader, the practical lesson is brief. Check which class you’re actually dealing with for any given stock. The letter in the name doesn’t reveal the difference on its own. The details are found in the securities prospectus or on the company’s investor relations page.