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Lesson 2 of 6 · 12 min
Dual class shares: splitting economic rights from voting rights
A dual class structure gives share classes different votes, different cash-flow rights, or both, so insiders can keep control of a company while outside investors supply most of the capital.
In short
- A dual class share structure typically pairs a widely held, traded class with one vote per share and a non-traded insider class with several votes per share.
- It lets founders or families with a minority economic stake control the company; strategy then follows their priorities, not necessarily those of public holders.
- Variants: unequal votes with equal economics; a non-voting class with equal dividend and liquidation rights; or unequal votes and unequal economics.
- Differential voting rights (DVR) shares trade votes for money: a fraction of a vote, a higher dividend if one is paid, and an issue price below the ordinary shares.
- DVRs can disappoint: thin institutional demand makes them illiquid, discounts can widen sharply, and the dividend premium is worth nothing if no dividend is paid.
- Some asset owners refuse to support unequal voting rights or will not buy dual class companies, because their votes would carry little weight.
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