Share Class

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DEFINITION of 'Share Class'

A designation applied to a specified type of security such as common stock or mutual fund units. Companies that have more than one class of common stock usually identify a given class with alphabetic markers, such as "Class A" shares and "Class B" shares. Different share classes within the same entity typically confer different rights on their owners.

BREAKING DOWN 'Share Class'

For example, a public company may offer two classes of common stock outstanding: Class A common stock and Class B common stock. This dual-class structure is typically decided on when a company first goes public and issues stock in the primary market.

For example, a private company that is undertaking an initial public offering (IPO) may choose to issue Class A shares to its new investors, while the original owners of the company receive Class B shares. In this case, the Class B shares would typically have enhanced voting rights. A dual-class structure such as this would be used if the original owners of the company wanted to sell the majority of their ownership stake in the firm, but still maintain majority voting rights.

As an investor, it's important to know what class of shares you are buying when you purchase common stock in a public company.

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