Some corporations have one single class of stock. Others have more than one class, with different rights.
Question:
Some corporations have one single class of stock. Others have more than one class, with different rights. For example, a company might have $100 par value preferred stock, which is entitled to a 4%
annual dividend on its par value before any dividends can be paid on common shares. Preferred stock might also vary in voting rights. In some cases preferred stock has extra voting rights, and is used to help one group keep control. In some recent public offerings, such as Facebook’s, the original shareholders kept extra voting rights to help control the company. One reason Alibaba chose to make its initial public offering in the U.S. is that U.S. stock exchanges allow such arrangements, while Chinese exchanges do not. Questions:
A. Would you as an investor be more, or less, willing to invest in common stock if you knew that the founders kept extra voting rights?
B. Do you think stock exchanges should allow arrangements where a small number of preferred shareholders keep control of a company?
Why, or why not?
Step by Step Answer:
Introductory Accounting A Measurement Approach For Managers
ISBN: 9781138956216
1st Edition
Authors: Daniel P. Tinkelman