Control Stock

DEFINITION of 'Control Stock'

1. Equity shares owned by major shareholders of a publicly traded corporation. These shareholders have either a majority of the shares outstanding or a portion of the shares that is significant enough to allow them to exert a controlling influence on the firm's decisions.

2. In situations where companies have more than one class of common shares, shares with superior voting power or vote weighting are considered to be control stocks, relative to the inferior class.

BREAKING DOWN 'Control Stock'

1. Shareholders who control a majority of a company's shares effectively have enough voting power to dictate the firm's decisions. As such, their shares can be referred to as control stock.

2. Suppose XYZ Corp. had two classes of common stock, Class A and Class B, and both types of shares carry equal claim to the firm's assets. In other words, if the firm has 100 common shares in total, 50 are Class A shares and 50 are Class B shares. Let's assume that the B shares entitle the shareholder to one vote, but the A shares entitle the shareholder to 10 votes. If you owned one Class A share, you would own 1% of the company's assets, but wield 10 votes at company meetings. An investor who owned one Class B share would have the same 1% claim to the firm's assets, but wield only one vote at company meetings.

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