In
finance, a class A share refers to a
share classification of
common or
preferred stock that typically has enhanced benefits with respect to
dividends
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-i ...
, asset sales, or voting rights compared to
Class B or
Class C shares. There may be restrictions on any specific issue of class A shares in exchange for the benefits; for example, preferences with regard to dividends may be traded for ''reduced'' voting rights. They are often convertible into class B (may not be
publicly traded) shares at a favorable rate.
For example, a company might allocate class A shares to its management giving them 7 times face value of class B shares, while class B shares have the same voting right as class A shares. Companies classify stock for many reasons. In some cases this is to give company insiders a greater degree of power over the company and to provide a better defense against events like
hostile takeover attempts.
''Class A share'' is also a way of pricing sales charges (loads) on
mutual funds in the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., federal district, five ma ...
. In a class A share, the sales load is up front, typically at most 5.75% of the amount invested. In contrast is the class B share that does not have an upfront charge, but instead has higher ongoing expenses in the form of a higher
12B-1 fee
Mutual fund fees and expenses are charges that may be incurred by investors who hold mutual funds. Operating a mutual fund involves costs, including shareholder transaction costs, investment advisory fees, and marketing and distribution expenses. F ...
, and a contingent deferred sales charge that only applies if the investor redeems shares before a specified period. The maximum A share sales load is decreased for larger investment amounts as a volume discount.
See also
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Outline of finance
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A-share (mainland China)
A shares (), also known as domestic shares () are shares that are denominated in Renminbi and traded in the Shanghai and Shenzhen stock exchanges, as well as the National Equities Exchange and Quotations.
These are in contrast to B shares th ...
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Series A round
A series A round (also known as series A financing or series A investment) is the name typically given to a company's first significant round of venture capital financing. The name refers to the class of preferred stock sold to investors in exc ...
References
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Equity securities