Are dual-class share structures bad for investors?

Some of the most-popular US technology stocks have dual-class share structures, which give founders disproportionate control. How should investors weigh up the pros and cons?

David Brenchley 30 April, 2019 | 2:00PM

One of the fundamental pillars of investing into listed companies is the one-share, one-vote principle that helps minority investors hold company executives to account. However, over the past few decades, this key tenet of the public market has come under pressure. 

Since the mid-1980s, we’ve seen a rising trend for companies coming to market with dual-class share structures, which give founders and executives disproportionate control over voting rights. In the past four years, that trend has been accelerating even faster, driven by large Silicon Valley-based tech firms.

Of the 1,150 companies that floated in the US between 1980 and 1985, just 2.4% had a dual-class structure, data collated by Jay Ritter, a professor at the University of Florida, show. Of the 2,295 firms that listed between 1996 and 2000, 9.1% had dual-class structures.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc A1,439.06 USD1.14
Alphabet Inc Class C1,444.96 USD1.17
Berkshire Hathaway Inc B210.45 USD0.83
BlackRock Inc547.81 USD2.38
Facebook Inc A254.82 USD2.12
JPMorgan Chase & Co93.47 USD0.87
Lyft Inc Class A27.53 USD2.84
Pinterest Inc39.90 USD3.66
Snap Inc Class A24.69 USD1.52

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David Brenchley

David Brenchley  

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