Question

What are some reasons why a company might use classified stock?

Answer 1

To segment to right to which certain common shareholder are entitled, companies often separate common equity into more than one class of shares called classified stock. Usually two class of shares exist Class A and Class B. Common difference between each class of share is their voting right. Class A has one voting right each share and class B has more than one voting right each share.

Company use classified stock is to enhance the ownership of some specific investor (promotor). by issuing classified stock, company enhance ownership of promotor.