Understanding Voting and Non-voting Shares

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When you purchase a stock, you are purchasing a part of the company or its assets, or given the assurance of a share in its profits.

Some shares take such ownership to a high level, by allowing you to have a direct stake in how the company is run. More than being a shareholder, you can also become a stakeholder.

Being informed of the different levels of ownership can help investors make up their minds on the class of shares to purchase.

With InvestSika, not only do you invest in US publicly listed companies, you also get to exercise your voting rights directly from your phone for companies who need to make decisions and need shareholder votes.

What is the difference between non-voting and voting shares?

In many cases, non-voting shares are priced slightly lower than voting shares. This is because they do not include the right to vote and may offer a lesser degree of control over the company. Having control affects the value of the stock prices. However, there is a slight difference in the share prices of both classes of shares.

Dual share classes

In some cases, a company creates a dual class of shares. This arrangement is supposed to shield the management of the company or the initial owners of the company from interference by later investors. At the point of creating a dual share class, the new shares are non-voting.

Many companies have set up shares that come with the same rights. This means that all owners of shares are stakeholders in the company, who can make decisions on how to run the company. These decisions include changing the management of the company including taking over the company if enough voting shareholders come together, but large multimillion-dollar companies may not necessarily want to deal with this problem. This problem arises when management and ownership interests clash.

For example, shareholders may not have the patience to endure sacrifices in profits made in the short term for long term growth or may not even accept the current style of management. In other cases, it may be possible that management would want to engage in projects that are not profit-oriented when shareholders cannot come to terms with why that is so.

By creating a dual-class of shares, it limits oversight of voting shareholders on management. However, it may create a more stable company as they are not always forced to placate profit-loving shareholders.

Does share class matter in investing?

When investing in a company, you might be interested in having a say in the decisions and directions of the company. This is especially true if the company is a private company that is not required to publish its financial information. However, with most publicly traded companies, the information you would gain by being a voting shareholder is mandatorily made available during earning calls and other similar events. If you are investing in a portfolio basket or ETF, voting rights may not matter.

With InvestSika, not only do you invest in US publicly listed companies, you also get to exercise your voting rights directly from your phone for companies who need to make decisions and need shareholder votes.

Conclusion

Invest wisely by drawing conclusions on whether you want to invest in a non-voting share or a voting share. Make this decision based on the transparency of the organization, how important it is for you to have a say in the affairs of the company, and how that would affect your investment profit.