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
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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 A2,291.75 USD-2.56Rating
Alphabet Inc Class C2,341.66 USD-2.38Rating
Berkshire Hathaway Inc Class B292.33 USD0.48Rating
BlackRock Inc857.45 USD-1.87Rating
Facebook Inc A305.97 USD-4.11Rating
JPMorgan Chase & Co161.22 USD-0.01Rating
Lyft Inc Class A49.16 USD-1.82Rating
Pinterest Inc58.36 USD-2.51Rating
Snap Inc Class A52.14 USD-4.68Rating

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David Brenchley

David Brenchley  

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