See Our Most Viewed Definitions

What It Is:

Class A shares are either 1) common stocks or 2) preferred stocks that offer enhanced benefits, such as greater voting rights and a higher dividend priority. 

How It Works/Example:

For example, let’s say Joe purchases stock in Company XYZ.  If Joe buys class A shares, a single class A share may give Joe six votes instead of one.  It will also place him at the front of the line when dividends are issued. However, if Joe were to buy class B shares, he may receive only one or two votes per share and would be at a lower priority for dividend payments.

Class A shares generally have liquidation preference over all other share classes, meaning that if the issuer were to liquidate, the class A shareholders would receive cash before other share classes. Companies describe the distinguishing features of their class A stock in their corporate charter and bylaws.

Why It Matters:

Companies classify stock for many reasons. Some classes of stock might represent ownership in a specific subsidiary, and others might have specific investment purposes, sell at different prices, or pay different dividends. Each class may also have ownership restrictions.

While class A shares offer shareholders more benefits, if the company issuing the stock is well-managed, retail investors needn't be concerned about the different classes of stock. In most cases, different shares are issued to give the company managers, insiders and directors a greater degree of power over the company -- and to provide a better defense against events like hostile takeover attempts. It should also be noted also that differences in share class do not affect the average investor’s share of the profits or benefits from the overall success of the company.