Class B Shares

Class B shares are a category of a company's common stock that typically comes with diminished voting rights compared to its counterpart, Class A shares. Think of it like a tiered membership at a club. While both Class A and Class B members get to enjoy the club's profits and amenities (representing an economic stake in the company), the Class A members get a much bigger say in how the club is run. Companies usually create these dual-class share structures when founders or families want to sell a portion of the business to the public to raise capital but are not so keen on giving up control. By issuing Class B shares with, say, one vote per share, while holding onto Class A shares that carry ten votes per share, the original owners can maintain majority voting power even if they own a minority of the total shares. This structure is quite common, especially in the tech and media industries.

The motivation behind creating multiple share classes almost always boils down to one word: control. Founders and early investors often have a long-term vision they want to see through without interference from the short-term whims of the public market.

Imagine you've built a successful company from scratch. You need to raise money to expand, but you believe your unique vision is the secret sauce. You don't want a new group of shareholders to vote you out or force a change in strategy next quarter. What do you do? You issue a separate class of shares to the public with limited voting power. This allows founders to have their cake and eat it too—they get the public's capital while keeping a firm grip on the steering wheel. Famous companies that use this structure include:

• Alphabet (Google): Founders Larry Page and Sergey Brin retain control.
• Meta Platforms (Facebook): Mark Zuckerberg holds super-voting shares.
• Ford Motor Company: The Ford family has maintained control for over a century through a special class of stock.

While control is the main driver, there are other, less common reasons:

• Accessibility: A company's Class A shares might trade for a very high price. To make ownership more affordable for retail investors, a company might issue lower-priced Class B shares.
• Dividend Differences: In rare cases, different classes might have different dividend policies, though this is not the norm.

For followers of value investing, the question isn't just “What are Class B shares?” but “Should I buy them?”. The answer often depends more on the people in charge than the voting power you receive.

The most famous example in the value investing world is Berkshire Hathaway. For decades, it had only one class of stock (BRK.A), whose price soared into the hundreds of thousands of dollars, making it inaccessible to most people. To combat investment firms creating “clones” that mimicked Berkshire's portfolio, Warren Buffett decided to issue Class B shares (BRK.B) in 1996 at a fraction of the price. Initially, a Class B share had 1/30th of the economic rights and 1/200th of the voting rights of a Class A share. After a 50-for-1 stock split in 2010, today's BRK.B shares represent 1/1,500th of the economic rights but only 1/10,000th of the voting rights of a BRK.A share. For Buffett, this was a perfect solution: it democratized ownership without meaningfully diluting the voting power of long-term Class A holders.

For the average investor, the answer is probably not. Your handful of votes is a tiny drop in a vast ocean and will rarely, if ever, influence a corporate decision. A value investor's primary focus should be on two things:

1. The quality of the underlying business.
2. The price you pay for your slice of its earnings.

A dual-class structure can be a major red flag if it protects entrenched, incompetent management from being held accountable. However, it can also be a huge positive if it allows a brilliant, shareholder-aligned founder like Warren Buffett to execute a long-term strategy that creates immense value. The key is to judge the managers by their track record, their capital allocation skills, and whether their interests are aligned with yours. If management owns a lot of stock and has a history of making smart decisions, their super-voting shares might be exactly what you want.

• Fewer Votes: Class B shares are a class of stock that typically has fewer voting rights than Class A shares but represents a similar economic interest.
• Founder Control: They are most often created so that founders and insiders can raise public money without ceding control of the company.
• Lower Price: They often trade at a much lower price per share, making them more accessible to ordinary investors.
• Management Matters Most: For a value investor, the lack of voting power is usually secondary to the quality and integrity of the company's management. A dual-class structure is not inherently good or bad; it depends entirely on who is in charge.
• Do Your Homework: Always check a company's investor relations website or official filings to understand the specific rights and features of each share class before you invest.