Definition
The term class A shares refers to common and preferred stock that offer their holders additional benefits, or different fees in the case of mutual funds. Class A shares normally have liquidation preference over all other shareholder classes.
Explanation
Companies have the option of issuing different classes of common and preferred shares. Class A shares typically bestow additional rights on the holder. These rights can include preference with respect to dividend payments, voting rights, as well as during liquidation. For example, holders of class A shares may be entitled to the payment of dividends before holders of class B shares. They may also be granted voting rights with respect to the election of members of the company's board of directors. Finally, holders of class A shares may be entitled to cash during liquidation before all other holders of common stock.
There are a number of reasons a company may issue different classes of stock, including offering insiders and company managers additional voting rights to defend against hostile takeovers. These shares may be issued to these individuals as part of the company's incentive program.
Mutual funds also offer different classes of shares. For example, class A shares will typically carry a front load that ranges from 2.50% to 5.75% of the original investment. In exchange for paying a higher upfront fee, class A shares in a mutual fund will usually impose lower ongoing fees.
Related Terms
The term closing price refers to the last price of a contract or security at the end of a trading session. The closing price is available shortly after 4:00 p.m. Eastern Time.
Moneyzine EditorJanuary 11th, 2024
The term closing bell refers to the ringing of a bell that signals the end of securities trading for the day. The most notable of the closing bells is that of the New York Stock Exchange.Moneyzine EditorJanuary 11th, 2024
The term close refers to the end of a trading session as determined by the financial market or exchange. Traders may have the option of placing orders after the close, which is known as after-hours trading or extended hours.Moneyzine EditorJanuary 11th, 2024
The term class B shares refers to common and preferred stock that may offer their holders fewer benefits, or charge higher fees in the case of mutual funds. Class B shares are normally subordinate to class A shares in terms of liquidation preference.Moneyzine EditorJanuary 11th, 2024
