What It Is:

Class A shares are generally the first in a series of stock classes maintained by a company. In the mutual fund world, Class A shares refer to mutual funds that charge front-end loads.

How It Works/Example:

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 generally set forth the distinguishing features of their Class A stock in their corporate charter and bylaws. Class A shares may also have voting and dividend preferences.

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.

Sometimes companies preserve the power of certain minority owners or management by assigning special voting rights to specific stock classes. It is important to note that these shareholders may or may not have provided as much capital as the other share classes.