Difference between Class B and Class A shares

Most companies provide greater roles to Class A and partial to Class B, or C shares, where remuneration on Class A is due to its scarceness.  Class B shares have miscellaneous benefits and some drawbacks. The B types have to pay the sales charge if it is sold within the mentioned duration (e.g. 6 years) and thus, these cannot be called no-load. B may be converted to low cost A shares and then, the owner will be obliged to pay a fee. The rules vary for such shares, mostly mentioned in company’s law. These shares have higher annual costs, although, the highest cost ratio is provided in Class C. While Class A can be converted into B, one cannot convert C to B or A.

Once issued B class shares can involuntarily be converted into A, but A cannot be reclaimed as B because these are issued in limited numbers by the company.  The investors earn through dividends on such shares. In July 2018, the Berkshire Hathaway chairman Warren E. Buffett converted Class A shares (11,867) to Class B (17,800,500), which was donated to five foundations. This accounted for 43 per cent of his holdings, which was given to organizations that included Buffett Foundation, Bill & Melinda Gates Foundation and others. The value of these shares went up to $3.4 billion.

Investors can buy Class A as a long-term plan, and medium term investment can be made in Class B. On the contrary the C can be bought from the start where the buyer is recommended to sell the shares in specified duration to earn profits.  These impose various charges and cannot be converted into A over time. The cost of holding C is higher for long term as compared to B or A. Most brokers opt for  short term investment in C as it portrays huge instability with extensive movement in short duration, and with time the cost of owning such shares can increase; hence, it is not advised to make long term investment in it.

Some of the non-voting Class A shares are considered equal to the B but the fees and rights can be different. The value of one vote of Class A can be in the range of 10 to 100 times the value of one B. Even though, B is voting share, and the owners are invited to board meet / conferences, the rights of the share can be redefined in meetings where the directors can convert a voting to non – voting type.   The B type cannot be held in the brokerage account and there is no market for trading it, but the owner can convert it into A to trade it as a regular stock at markets. Mostly the market value of A and B is almost same and it can be converted one to one.

Investors can buy other types of shares such as Class D, Class R or Class I which have low fees, and are available, extensively, to all the buyers.

To get more comparisons of Class A, B, C and other share types, click Asset Class Pedia at (https://assetclasspedia.com/).