Coinbase debut: What is a Class A share?

Ever wondered what a Coinbase (NASDAQ:COIN) Class A share is? Here's the rundown on share structures, and what they can mean

| More on:
guy helping girl invest in shares and dividends

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Watchers of the blockbuster Coinbase Global Inc (NASDAQ: COIN) debut listing last night might have noticed something that would look rather odd to an ASX investor. That's apart from its 52% pop upon listing, of course.

Coinbase shares are often referred to as 'Class A'. 

Now, this isn't some arbitrary badge of self-congratulation (i.e aren't we a Class A company?). It actually refers to something that is enormously relevant for any current or potential Coinbase investor. 

And it's this: Coinbase has two classes of shares. But only one is available for everyday investors like you or I. Those shares are the Class A shares that investors can now buy on the Nasdaq exchange. Those shares entitle the owner to one vote per share at Coinbase, as one might expect.

However, there is also another class of shares that investors can own of Coinbase – Class B shares. According to Coinbase's SR-1 prospectus filing with the US Securities and Exchange Commission (SEC), an owner of a Class B share is entitled to 20 votes per share, rather than 1.  However, these shares are not available to the public or on the stock market. Only institutional investors and company insiders can own and trade these shares.

What's the deal with Class A and B shares?

If this sounds outrageously unfair to you, I wouldn't be surprised. On the ASX, these types of multi-class shares that don't conform to a 'one vote, one value' system are not permitted. However, they are common in the US. It gives companies a way to retain power with founders or insiders while permitting them to dilute their ownership of the company. Its proponents often argue that it allows the founder to focus on the company's long-term future by not having to worry about other substantial shareholders. 

Other companies that employ a ClassA/B model include Berkshire Hathaway Inc (NYSE: BRK.A)(NYSE: BRK.B), Facebook Inc (NASDAQ: FB) and Fox Corp (NASDAQ: FOX)(NASDAQ: FOXA).

Triple the fun

However, it could be even more complicated. Some companies even have a triple-class share structure. Take Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL). It has three classes of shares. Class A shares trade under the GOOGL ticker. Those owners are entitled to one vote per share. Class C shares are the GOOG shares. Class C owners get 'observer status' with zero votes per share. Alphabet's Class B shares get 10 votes per share, but, like Coinbase Class B, are not traded on the public share market, and are mostly owned by Alphabet's founders Larry Page and Sergei Brin. Page and Brin, incidentally, have now left the company but kept their Class B shares.

Perhaps the most undemocratic model on the US markets goes to Snapchat owner Snap Inc (NYSE: SNAP) though. According to Snap's filing prospectus from 2017, there are three classes of SNAP shares. But only Class A are publicly available. Class A shares, however, come with zero votes. Class B shares are available to insider investors. But these shares still only come with one vote apiece. Class C shares come with 10 votes per share. But only Snap's co-founders in Evan Spiegel and Bobby Murphy own these shares. According to Snap's prospectus, this gave them 88.5% of the company's voting power at listing. 

America may be a democracy, but its share markets are a different story in many cases.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Sebastian Bowen owns shares of Alphabet (A shares) and Facebook. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Berkshire Hathaway (B shares), and Facebook and recommends the following options: short June 2021 $240 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and long January 2023 $200 calls on Berkshire Hathaway (B shares). The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Berkshire Hathaway (B shares), and Facebook. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
International Stock News

If you invested $10,000 in Nvidia stock the day ChatGPT came out, this is how much you'd have today

Buying Nvidia when the disruptive AI chatbot launched would have been a smart move.

Read more »

A Tesla car driving along a road at sunset
International Stock News

Why Tesla stock was climbing today

Investors were encouraged by news of a price hike on the Model Y.

Read more »

Plate with coloured wedges being parcelled out like a slice of pie representing a share split
International Stock News

Stock-split watch: Is Nvidia next?

Nvidia last split its stock when it traded for a pre-split $744 in 2021.

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

1 Wall Street analyst thinks Tesla stock is going to $125. Is it a sell?

Tesla is no longer a magnificent stock, according to a Wells Fargo analyst.

Read more »

A young man goes over his finances and investment portfolio at home.
International Stock News

Is Nvidia stock a buy?

The company's stock could rise 40% over the next two years and outperform the S&P 500.

Read more »

Man with hands in the middle of two items with money bags on them.
International Stock News

Is Nvidia headed for a stock split?

Nvidia stock has split five previous times in the company's history.

Read more »

Digital rocket on a laptop.
International Stock News

Nvidia shares surged (again) today. Is it too late to buy the red-hot artificial intelligence (AI) growth stock?

Nvidia stock has gained nearly 300% over the past year. Can investors still profit from this AI stock?

Read more »

A woman holds a soldering tool as she sits in front of a computer screen while working on the manufacturing of technology equipment in a laboratory environment.
International Stock News

Can you buy Nvidia shares on the ASX?

This stock has rocketed higher. How do we get access to it?

Read more »