Define Dual Class Shares of stock. Why would a firm consider issuing dual classes of stock? Are dual shares common in the United States? In what type of industry are they found?

What will be an ideal response?

Dual class stock exists when a firm issues two types of equity shares, generally called class A and class B. One class, say class A, typically has one vote per share as well as dividend rights, and trades in the market. Class B shares have superior voting rights, say 100 votes per share but do not trade in the open market. Further, class B shares frequently receive smaller dividends than class A stock in exchange for their superior control.

While dual classes of stock are not the norm in the United States, more have been issued in recent years as stock exchanges have eased their restrictions. However, as of today, dual classes of stock are still in the minority. The reason for issuing dual classes of stock typically revolve around a need for increased capitalization and a desire on the part of existing owner/managers to maintain control and direction of the company. This can be seen in media and publishing firms who need capital but wish to maintain their message and influence.