Morningstar
Get 14 Days Free
Equity Research & Insights

Are Dual-Class Share Structures Bad for Investors?

Some of the most-popular US technology stocks have dual-class share structures, which give founders disproportionate control. How should investors weigh up the pros and cons?

David Brenchley 24 April, 2019 | 1:35PM

Apple campus, Silicon Valley, tech stocks, dual-class share structures, corporate governance, ESG, Lyft IPO, Uber, Pinterest, Facebook, Google, Berkshire Hathaway

One of the fundamental pillars of investing into listed companies is the one-share, one-vote principle that helps minority investors hold company executives to account. However, over the past few decades, this key tenet of the public market has come under pressure.

Since the mid-1980s, we’ve seen a rising trend for companies coming to market with dual-class share structures, which give founders and executives disproportionate control over voting rights. In the past four years, that trend has been accelerating even faster, driven by large Silicon Valley-based tech firms.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free
TAGS

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Allianz Technology Trust Ord2,500.00 GBX-2.72
Alphabet Inc A1,616.11 USD3.80
Alphabet Inc Class C1,621.01 USD3.43
Berkshire Hathaway Inc Class A302,500.01 USD-0.17
Berkshire Hathaway Inc Class B201.90 USD0.19
Facebook Inc A263.11 USD-6.31
JPMorgan Chase & Co98.04 USD0.90
Lyft Inc Class A22.83 USD-0.44
Pinterest Inc58.95 USD-5.70
Scottish Mortgage Ord994.50 GBX-2.02
Snap Inc Class A39.39 USD-6.70

About Author

David Brenchley

David Brenchley  is a Reporter for Morningstar.co.uk

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.
  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.      Terms of Use     Privacy Policy.    Cookie Consent
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies

The Morningstar Star Rating for Stocks is assigned based on an analyst's estimate of a stocks fair value. It is projection/opinion and not a statement of fact. Morningstar assigns star ratings based on an analyst’s estimate of a stock's fair value. Four components drive the Star Rating: (1) our assessment of the firm’s economic moat, (2) our estimate of the stock’s fair value, (3) our uncertainty around that fair value estimate and (4) the current market price. This process culminates in a single-point star rating that is updated daily. A 5-star represents a belief that the stock is a good value at its current price; a 1-star stock isn't. If our base-case assumptions are true the market price will converge on our fair value estimate over time, generally within three years. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Morningstar Star Rating for Stocks, please visit here

Quantitative Fair Value Estimate represents Morningstar’s estimate of the per share dollar amount that a company’s equity is worth today. The Quantitative Fair Value Estimate is based on a statistical model derived from the Fair Value Estimate Morningstar’s equity analysts assign to companies which includes a financial forecast of the company. The Quantitative Fair Value Estimate is calculated daily. It is a projection/opinion and not a statement of fact. Investments in securities are subject to market and other risks. Past performance of a security may or may not be sustained in future and is no indication of future performance. For detail information about the Quantiative Fair Value Estimate, please visit here