Dual Class Shares

I'd Rather Be the Hammer

Act One: BMOC

Client (“C”): Thank you for suggesting that I buy stocks.
Advisor (“A”): Of course.
C: You’ve taught me that if I own stock in a company, I can possibly make more money than if I own a bond.
A: Or lose more money.
C: Please don’t lecture me.
A: I wasn’t lecturing you.
C: Do you know why else I like investing in stocks?
A: Why?
C: Because I can vote to keep the directors in or to boot them out.
A: Why would you care?
C: Because if they’re not doing a good job, I can find someone to replace them. Like me.

Act Two: Reality TV

A: Do you remember that I taught you that sometimes there are “dual” classes of common stock that a company may issue, like Class A and Class B?
C: Issue shmissue. I own a share of common stock, I get to vote, I get my share of the profits, right?
A: Not exactly. The stock you own, Class A, only gets one vote, while the stock some others own, Class B, gets two or more votes.
C: Hey, I want those two-vote stocks. You didn’t get those for me? Are you an idiot, what’s the matter with you?
A: I couldn’t. The company gives them to the Directors and some other big honchos.
C: Wait a second, who owns the company?
A: The shareholders.
C: So how can some shareholders give themselves more votes per share?
A: They can.
C: What happened to one man, one vote?
A: That’s American democracy. This is a finagling company.
C: Where am I, in Russia?

Part Three: Houdini and the Elephant

A: Okay, I’ll give you two examples of classes of stock.
C: Promise me you’ll make this simple.
A: I promise.
C: Good.
A: You know Amazon, correct?
C: Hey, have you heard the joke about the cannibal and the alligator?
A: Not that Amazon.
C: Just kidding. Ha Ha. I own some shares.
A: Anyway, Jeff Bezos owns only Class A shares of the company, 17%.
C: I’ve made a lot of money owning Amazon.
A: Yes, I know.
C: But why is he chairman and not me?
A: He has more shares, but he only has one vote per share.
C: That sounds fair.
A: Now have you ever heard of Snap?
C: As in Snap On Snap Off?
A: No, that’s Clap On Clap Off.
C: Just kidding. Ha Ha. I own some shares.
A: Snap happens to have three classes of stocks, Class A for you, Class B for the big honchos, and Class C for the two founders.
C: So as Mr. Class A, I get one vote.
A: No, at Snap you get 0 votes.
C: How about class B, Mr. Big - get it?
A: More than one. And please don’t be a child.
C: if Class A gets one vote and Class B gets at least two votes, I can’t wait to hear what Class C gets.
A: Ten votes.
C: The founders of the company get ten votes and I get none?
A: Yes, they control 88% of the voting shares.
C: Like Putin?
A: Yes.
C: I bought Snap on the first day of trading. It cost me $24 per share.
A: And?
C: Today it’s trading at $11 per share.
A: So you’ve lost money.
C: Yes
A: So why don’t you sell?
C: I want to take over the company.
A: But you’ll never have the votes.
C: It doesn’t matter.
A: Why not?
C: The two founders are gonna disappear like one of their Snapchats.
A: Touche.
C: Thanks.