Equity Markets, Valuation, and Analysis. H. Kent Baker
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FactSet (2019).
| Largest Beneficial Shareholders | Economic Ownership (%) | Voting Power (%) | |
| 1 | Advance/Newhouse Programming Partnership (ANPP) | 26.3 | 24.1 |
| 2 | The Vanguard Group, Inc. | 7.3 | 5.8 |
| 3 | BlackRock Inc. | 4.8 | 3.7 |
| 4 | Hotchkis & Wiley Capital Management, LLC | 3.3 | 0.0 |
| 5 | John C. Malone | 2.6 | 21.4 |
| 6 | Clearbridge Investments, LLC | 2.5 | 5.8 |
| 7 | FMR LLC | 1.9 | 4.5 |
| 8 | Capital Research Global Investors | 1.7 | 4.0 |
| 9 | JPMorgan Chase & Co. | 1.3 | 3.0 |
| 10 | David M. Zaslav | 0.4 | 0.5 |
| Total top 10 beneficial shareholders | 52.1 | 72.8 | |
| ANPP + John C. Malone | 28.9 | 45.5 |
This table lists the largest beneficial shareholders by economic ownership, and the corresponding voting power attributed to each of those beneficial shareholders. Because of Discovery's dual-class share structure, certain shareholders have disproportionate voting rights relative to their economic interest. The economic ownership and voting power columns of this table present the Series A-1 and Series C-1 shares on an “as converted” basis. Each Series A-1 share is convertible into nine shares of Series A stock, and each Series C-1 share is convertible into 19.3648 shares of Series C stock. Numbers are rounded for presentability.
SUMMARY AND CONCLUSIONS
Common stock represents residual claims to a corporation's profits after meeting other stakeholders' claims. The majority of companies link economic interest in the company with control, enabling one share to carry one vote for issues requiring shareholder approval. Although common stock generally is more homogenous than corporate debt issuances, several mechanisms are available for corporations to differentiate one class of stock from another.
Besides ordinary common stock, this chapter discusses several forms of more complicated share listings. For single classes of stock, these include cross-listings, depositary receipts, dual-listed companies, and tracking stock. Cross-listed shares enable domestic companies to trade in foreign markets. Depositary receipts similarly achieve this goal via a financial intermediary, both with and without the company's sponsorship. Dual-listed companies are a special instance of common stock. Found mostly in Europe, these listings represent two independent companies whose businesses are merged while retaining separate legal identities. Each twin's respective management team agrees to equalize each twin to a predetermined ratio via complex agreements, but the market of dual-listed company stocks exhibits mispricings from theoretical parity. Tracking stock is a less popular, arcane form of common stock of a corporation whose value theoretically targets the financial performance of only a subunit of the corporation.
Finally, dual-class common equity structures are a prevalent form of stock in which different voting arrangements offer certain shareholders superior voting rights. A wedge separates a shareholder's control from that owner's capital at risk. Dual-class common stock can permit overall control of the corporation without a controlling stake in the economic value of the enterprise.
DISCUSSION QUESTIONS
1 Compare and contrast depositary receipts and cross-listed stocks.
2 Discuss the benefits and drawbacks for investors in tracking stocks.
3 Explain the three types of dual-listed company structures.
4 Identify what motivates companies to offer dual-class equity structures.
REFERENCES
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8 Citi. 2019. “American Depositary Receipts (ADRs): A Primer.” Available at https://depositaryreceipts.citi.com/adr/common/file.aspx?idf=1248.
9 Cleary Gottlieb Steen & Hamilton. 2003. “Cross Border Mergers: The Cases for and against Dual Headed Structures.” European M&A Report, October, 3−7.
10 Condon, Zoe. 2018. “A Snapshot of Dual-Class Share Structures in the Twenty-First Century: A Solution to Reconcile Shareholder Protections with Founder Autonomy.” Emory Law Journal 68:2, 336–367. Available at http://law.emory.edu/elj/content/volume-68/issue-2/comments/dual-class-twenty-first-solution-protections-autonomy.html.
11 Council of Institutional Investors. 2019. “Dual-class Companies List.” Available at https://cii.membershipsoftware.org/files/June%202019%20Dual%20Class%20List%20Upgrade%20w%20Lucy%20edits(2).pdf.
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