Class A vs Class B Stocks
Common stock typically carries voting rights. This means that a shareholder has the right to vote on certain issues that impact the company. These votes may be for board of director members, stock splits or other matters that impact the company. When a company decides it wishes to offer two classes of stock, typically, the stock is considered Class A and Class B.
The most significant difference in these shares is the voting rights attached to them. Provided that a company declares a dividend, common stock shareholders are usually entitled to receive unlimited declared dividends. This is one of the major differences between common and preferred shareholders - preferred shareholders are limited to the return they may earn.
This leaves the shareholder wondering if they should be choosing Class A stocks or invest in Class B stocks. This largely depends on the company. Class A stocks generally carry additional voting rights over Class B stocks. However, this is not true for all companies. For those who are uncertain how Class A or Class B stocks differ, one of the best known companies that offer both classes is Berkshire Hathaway.
As of the close of the stock market on Friday, 2/25/2011 BRK.A (Class A Common shares) were selling at $127,550.00 per share. BRK.B (Class B Common shares) were selling at $84.87 per share. Neither of these classes pays a dividend. According to a Berkshire Hathaway memo, "Berkshire Hathaway Inc. has two classes of common stock designated Class A and Class B. A share of Class B common stock has the rights of 1/30th of a share of Class A common stock except that a Class B share has 1/200th of the voting rights of a Class A share (rather than 1/30th of the vote)."
As you can see, making the decision between choosing Class A stocks versus Class B stocks requires the investor to carefully review the information available about the stock. This is the only way a savvy investor can make an informed decision.