Non-voting stock is the
stock
In finance, stock (also capital stock) consists of all the shares by which ownership of a corporation or company is divided.Longman Business English Dictionary: "stock - ''especially AmE'' one of the shares into which ownership of a company ...
that provides the shareholder very little or no vote on corporate matters, such as election of the
board of directors
A board of directors (commonly referred simply as the board) is an executive committee that jointly supervises the activities of an organization, which can be either a for-profit or a nonprofit organization such as a business, nonprofit organiz ...
or
mergers
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
. This type of share is usually implemented for individuals who want to invest in the company's profitability and success at the expense of voting rights in the direction of the company.
Preferred stock
Preferred stock (also called preferred shares, preference shares, or simply preferreds) is a component of share capital that may have any combination of features not possessed by common stock, including properties of both an equity and a debt ins ...
typically has non-voting qualities.
Many countries such as Germany, Russia, the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
and other
commonwealth realm
A Commonwealth realm is a sovereign state in the Commonwealth of Nations whose monarch and head of state is shared among the other realms. Each realm functions as an independent state, equal with the other realms and nations of the Commonwealt ...
s have laws or policies against multiple/non-voting stock. In the US, not all corporations offer voting stock and non-voting stock, nor do all stocks usually have equal voting power. Warren Buffett's
Berkshire Hathaway
Berkshire Hathaway Inc. () is an American Multinational corporation, multinational conglomerate (company), conglomerate holding company headquartered in Omaha, Nebraska, United States. Its main business and source of capital is insurance, from ...
corporation has two classes of stocks, Class A voting stock () and Class B non-voting stock (). The Class B stock carries 1/10,000th of the voting rights of the Class A stock, but 1/1,500th of the dividend.
Takeover
Non-voting stock may also thwart hostile
takeover
In business, a takeover is the purchase of one company (the ''target'') by another (the ''acquirer'' or ''bidder''). In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to t ...
attempts. If the founders of a company maintain all of the voting stock and only sell non-voting stock to the public, takeover attempts are unlikely. They may occur only if the founders are willing to tender an offer by an unfriendly bidder.
There are consequences to not releasing voting rights to common shareholders; these include fewer supplicants for a friendly takeover, displeased shareholders as a result of the corporation's limited growth potential, and difficulty finding bidders for additional non-voting shares in the market. However, this is debatable since all publicly traded companies have their common shares in the open market for anyone to purchase. Examples include
Tencent
Tencent Holdings Ltd. () is a Chinese multinational technology and entertainment conglomerate and holding company headquartered in Shenzhen. It is one of the highest grossing multimedia companies in the world based on revenue. It is also the w ...
buying 12% now 17% equity (non-voting stake) in
Snap Inc.
Snap Inc. is an American camera and social media company, founded on September 16, 2011, by Evan Spiegel, Bobby Murphy, and Reggie Brown based in Santa Monica, California. The company developed and maintains technological products and services ...
And Investment, and tender offers.
See also
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Mergers and acquisitions
Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...
*
Microeconomics
Microeconomics is a branch of mainstream economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Microeconomics fo ...
*
Industrial organization
In economics, industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and market (economics), markets. Industrial organization adds real-world complic ...
*
Voting interest
Voting interest (or voting power) in business and accounting means the total number, or percent, of votes entitled to be cast on the issue at the time the determination of voting power is made, excluding a vote which is contingent upon the happeni ...
References
External links
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{{stock market
Stock market
Mergers and acquisitions
Equity securities