True or False: To segment the rights to which certain common shareholders are en

Question

True or False: To segment the rights to which certain common shareholders are entitled, companies often separate common equity into more than one class of shares called classified stock. False True Consider this case: When Google went public, it issued Class B shares that had 10 votes per share as compared to Class A shares that had 1 vote per share. Class B shares were sold to the founders, executives, and insiders in the company. Source: "Google 2004 Annual Report, " on Google Investor Relations, http://investor.google.com/pdf/2004_AnnualReport.pdf. Based on this example, which of the following statements is true? Classified stock is issued to give more votes per share to the founders of the firm. Classified stock is not issued to give more votes per share to founders of the firm.

Explanation / Answer

1. True statement

As the classified shares give super voting rights to certain class of investors such as founders,executives etc. Usually in class A and class B shares.

2. A statement is true.

Classified stock is issued to give more votes per share to the founder of the firm.

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