October 2021 has proven to be a challenging time for social networking giant Facebook, which has faced yet another round of leaked internal documents and revelations made to lawmakers by former employees turned whistleblowers. Amidst this PR debacle, the company is considering changing its name, and this is a decision that will ultimately come down to co-founder and CEO Mark Zuckerberg.
Board decisions at Facebook are decided by votes; this is no different than other publicly listed companies, but Mark Zuckerberg enjoys more than 50% voting rights by virtue of holding a massive amount of Class B shares, which are worth 10 shareholder votes each. With this kind of voting power, Zuckerberg has full control of the Facebook executive board.
Most stock investors are familiar with common and preferred stock, which in turn can be split into various classes. There are seven classes of shares; individual investors typically have access to A, C, and D shares.
Here is a description of all share classes:
* A shares are the first that come to mind when thinking about common stock, but they can also be preferred. If they are common, they can pay dividends, and they grant one vote to shareholders.
* B shares, as previously mentioned, increase voting rights ten-fold, but they can be converted to Class A by means of an agreement.
* C shares are the kind use to manage mutual funds, and they have features that allow the calculation of management fees plus other costs. There are no voting rights associated with Class C securities.
* D shares are similar to Class C, but they are offered to retail stock brokers at a discount. The “D” stands for discount, which makes them suitable for brokers that charge lower trading and portfolio maintenance fees.
* I shares are offered to institutional investors and market makers. There are minimum investment fees associated with the acquisition of Class I securities.
* R shares are the securities managed by pension funds that work with retirement accounts such as 401(k) plans.
* Z shares are similar to stock options offered to employees, but only those who work for pension funds.
For individual investors, the choice of shares will usually come down to Class A; however, they can still choose between common and preferred stock if available. Preferred stock can be traded just like its common counterpart, but dividend payments are hardwired. For the most part, preferred stock is more resilient to market volatility, but it also involves relinquishing voting rights.
Finally, no discussion of Wall Street equity securities would be complete without exchange-traded funds, which are highly liquid and very popular versions of mutual funds. The net asset value formula of mutual funds still applies to ETFs, but investors only see the real-time price of these securities, which can track a basket of underlying stocks. Some of the most popular ETFs on the market now invest in FAANG stocks, which stand for Facebook, Amazon, Apple, Netflix, and Google. When ETFs are priced, they include everything from their market values to their expenses and management fees.
