Question

Pls do not handwrite the answer, this is for easy reading

Question 4:-

a) Dual class shares involve two classes of shares which have different voting rights. For example, 1 class A share carries1 vote while 1 Class B share carries 10 votes. Examples of dual class shares include Facebook. Recently, the SGX announced that it would allow companies having dual class shared to be listed.

Analyse why an investor is willing to buy shares that carry lower voting rights? Pls, write with more details to support your reasons.

Answer 1

A) Sometimes companies chooses to issue multiple class of common stock issues. They are generally classified as Class A and Class B Shares. Generaly Class A Shares are considered more superior than Class B . It is believed that Class A Shares Shares carry more voting rights than Class B. But this is not always true every time. Sometimes Class B shares have more votes than their Class A counterparts.

Ant how all these classes carry the same equity interest in a company and identical rights to share in company profits. Investors wont worry about their classification as long as they believe those with the most voting power are making good decisions, leading to efficient operation of the company and steadily increasing return on equity.

Investors should research about the Share classes before making an investment decision.