stock class

1. A category of capital stock issued by a company and having specific rights or characteristics. Most firms have only a single class of stock outstanding. Thus, every share has exactly the same rights as every other share. But some companies have two or more classes of capital stock, designated as class A, class B, and so forth. For example, one class may have controlling voting rights, but both classes may share equally in dividends. In general, a firm issues different classes of stock when it wishes to sell one class to the public and reserve another class for its founders. Also called class, classified stock, dual-class stock. See also common stock.
2. A category of stock issued by a mutual fund. Funds sometimes issue multiple classes of stock. A fund, for example, may have one class of shares that carries a sales fee and another class of shares that has a contingent deferred sales fee and a 12b-1 fee, but no initial sales fee. Both classes of shares would be based on the same portfolio of securities.

Case Study In May 2007, Rupert Murdoch's News Corp. offered $5 billion—$60 per share—in an uninvited takeover attempt of financial publisher Dow Jones & Company. The offer represented a premium of 65% over the prior day's closing price of $36.33, although it was still substantially under the high price of $76.75 that had been reached in 2000. The large premium offered by News Corp. was necessitated by Dow Jones's equity capitalization, which included two stock classes. The firm's outstanding stock consisted of nearly 62 million shares of common stock plus 20 million shares of supervoting class B stock. Owners of common stock could cast one vote per share, while class B shareholders, mostly members of the Bancroft family, enjoyed ten votes per share. Although family members held slightly less than 25% of all outstanding shares of Dow Jones, they controlled nearly 65% of voting power through their ownership of 82% of the supervoting class B shares. While a premium of 25% or 30% might have easily swayed shareholders of a company with only a single class of common stock, News Corp. was required to offer enough of a premium to convince family members to part with one of the country's last family-owned publishing empires.