WHAT ARE
DUAL-CLASS SHARES?

A company can create a dual-class share structure either when it launches an IPO or following a restructuring process. The reasoning behind the setting up of a dual-listing and the rights associated with different classes of stocks can be important to potential investors.

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Dual class shares represent a corporate structure where a company issues two or more classes of shares with different voting rights. The main aim of creating a multi-class share structure is to give certain investors a greater say in the direction of the company.

This guide will explain why and how dual-listing of shares works and what it can mean for investors.

How Do Dual-Class Shares Work?

Dual class shares occur when a company splits its stock into two different categories, for example Stock A, and Stock B, with both stocks having similar properties but also have some key differences. Those differences are determined on a case-by-case basis.

A company can create a dual-class share structure either when it launches an IPO, and offers two classes of stocks to investors. Alternatively it can be instigated by a company’s management should they determine to implement a restructuring process and issue new shares of a different share class.

A dual-class structure fundamentally alters the traditional one-share, one-vote principle that governs most public companies.They create an imbalance where certain shareholders – typically founders, early investors, or management, retain disproportionate control over company decisions.

The mechanics are relatively straightforward yet potentially powerful. A company might issue Class A shares to the public with one vote per share, whilst reserving Class B shares with multiple votes per share for insiders.

A dual-listing structure gives certain investors a greater say in the direction of the company. The additional voting power allows founders to maintain control even as their economic ownership dilutes through public offerings or additional funding rounds.

Share Class Structures Explained

Different classes of share may have equal commercial rights, for example Class A and Class B shares may be entitled to equal dividends and represent equal ownership rights. But one class may have preferential voting rights.

Splitting power in this way is known as creating a multi-class share vehicle and, in general, the stock is split into two classes to create a dual structure.

A Class-Structure Case Study:

Company XYZ issues Class A shares which are available to public investors. They provide economic ownership, are freely tradeable on stock exchanges, and carry standard voting rights – one vote per share.

Class B shares are also issued. Sometimes referred to as “founder shares” or “super-voting shares” these Class B shares have more voting power than Class A shares. In our example each share represents equal commercial value but carries 20 votes. This enables holders of Class B shares to extend more control with a smaller economic stake.

It’s important to note that the structuring of share classes while following typical formats are all unique. The structure may be such that Class A has the greater voting power of the two Classes, and some companies may also create other (Class C, D, E) shares with no voting rights at all, purely for economic participation.

Examples of Companies with Dual-Class Shares

Several major companies trading on global exchanges employ dual class structures, each with unique voting arrangements that demonstrate the variety of approaches to this corporate governance model.

Alphabet (Google) maintains one of the most well-known dual class structures. The company has three share classes: Class A shares (GOOGL) with one vote each, Class B shares with 10 votes each (held primarily by founders), and Class C shares (GOOG) with no voting rights. This structure allows founders Larry Page and Sergey Brin to maintain significant control despite owning a minority of the total shares.

Meta Platforms employs a dual class structure where founder and CEO Mark Zuckerberg is a holder of the company’s Class B shares. The company’s Class B shares carry 10 votes per share compared to Class A’s (META) single vote, enabling Zuckerberg to maintain majority voting control with minority economic ownership.

Alibaba also sought to list with a dual class structure that would preserve founder control. When the Hong Kong Stock Exchange initially rejected this structure, the company opted for a New York Stock Exchange listing instead, highlighting the regulatory differences between markets.

Controversies and Investor Considerations

Dual class structures remain controversial among investors and governance advocates. Critics argue these structures entrench management, reduce accountability, and can lead to decisions that benefit controlling shareholders at the expense of minority investors.

The concentration of voting power has the potential to result in limited oversight of management decisions and reduced responsiveness to shareholder concerns.

However, proponents argue that dual class structures enable visionary founders to pursue long-term strategies without pressure from short-term oriented investors. This can be particularly valuable for technology companies and other innovative businesses requiring patient capital and strategic flexibility.

For individual investors, dual class shares present both opportunities and risks. While you may benefit from the economic performance of well-managed companies, your ability to influence corporate decisions remains limited. Consider these factors when evaluating dual class investments:

• Voting dilution: Understand exactly how much voting power your shares carry
• Sunset provisions: Check if enhanced voting rights expire after a certain period
• Control premiums: Assess whether the market prices in the governance structure
• Management track record: Evaluate the controlling shareholders’ history of treating minority investors fairly

The Future of Dual-Class Shares

The landscape for dual class shares continues to evolve globally. Looking ahead to 2026 and beyond, several trends are shaping the dual class landscape:

• Regulatory evolution: Continued refinement of rules balancing founder control with investor protection
• Market acceptance: Growing acceptance among institutional investors, particularly for high-growth technology companies
• Enhanced disclosure: Greater transparency requirements around voting structures and their impact

Final thoughts

Dual class share structures balance founder control with public market access, fundamentally reshaping traditional corporate governance principles.

Each multi-class situation needs to be approached individually with thorough research undertaken to establish if the deviation from the norm in terms of corporate governance represents an opportunity or a risk to potential investors.

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FAQs

Can I buy Class B shares with enhanced voting rights?

Typically, no. Class B shares with enhanced voting rights are usually restricted to founders, early investors, and select insiders. Public investors generally can only purchase Class A shares or non-voting shares through standard market transactions.

How do dual class shares affect takeover attempts?

Dual class structures can effectively block hostile takeovers since controlling shareholders can reject acquisition offers even if the majority of economic shareholders support the deal. This “anti-takeover” effect is often cited as both a benefit (protecting long-term vision) and a drawback (reducing accountability).

Do all stock exchanges allow dual class listings?

No. Different exchanges have varying policies. The NYSE and NASDAQ in the US have long permitted dual class structures, whilst the London Stock Exchange only began allowing them for premium listings in 2021. Some exchanges, like the Singapore Exchange, still restrict or prohibit such structures.

How do sunset provisions work?

Sunset provisions mandate that shares with preferential voting rights such as Class B (founder) shares automatically convert into standard Class A shares. Sunset clauses might be time-based, where the founder’s control is temporary and expires after an industry standard time frame of seven years. Or the clauses can be event-based, for example, additional voting rights may expire if the founder’s equity stake falls below a certain percentage or if the founder leaves the company.

Do dual-class shares actually lead to better stock performance?

The evidence is mixed and often depends on the company’s “maturity.” Research suggests that high-growth tech firms with dual-class shares often outperform in their first 5 to 10 years because founders can ignore short-term market noise to focus on R&D. Other studies indicate that after the 10-year mark, the lack of management accountability can lead to agency costs where the stock may trade at a discount compared to single-class peers.