How Class B Shares Cured Me of Stock Picking

in Stock Market

When I was young I invested in individual stocks, I watched trends and I tried to read the Yearly prospectuses. It was thanks to reading the original WWE IPO (after I’d bought some of their stock) that I was cured of stock picking of “interesting stocks”. Unfortunately it didn’t cure me of investing in Nortel, which I worked for at the time, but again, that is my own damn fault.

Treasures in the Prospectus

class b shares

The Market Where You Need to Know All the Rules
Image courtesy of audfriday13, at FreeDigitalPhotos.net

To outline what I found out when I read the stock prospectus I found a very interesting explanation of the Shares I was going to buy here:

WWE has a dual class share ownership structure, which includes Class A and Class B stock.  The McMahons own a de minimis amount of Class A stock and all of the Class B stock.  The two classes have equal economic rights and unequal voting rights, meaning that each Class A share is entitled to one vote and each Class B share is entitled to ten votes.

Class B Shares ?

So if I owned say 100 shares of WWE, I was allowed to vote on yearly proposals at the shareholder meetings and such, but at the end of it all the McMahon family owned enough stock to do whatever the heck they wanted (almost like in their wrestling matches), and this meant my purchase of the initial stock was effectively loaning the McMahon’s money, as I would have no say in how the firm was to be run. I do realize that I will never own enough stock in any company to be able to actually impact the ShareHolders meetings, however, I know a stacked deck when I see it as well.

This one sticks out as a huge example of what can happen if you don’t read the documentation available to you, about where you are putting your money, and this made me get out of individual “interesting” stocks. With Index Funds, and with ETFs that use Indexes, at least I know that I am not relying on a single stock, and assume that the folks who devise the mix for the Index have taken into consideration any “Class B” or any such derivative Tom-Foolery, into consideration.

Are there other Stock Peculiarities folks have noticed after reading the yearly prospectus from the company?

{ 2 comments }

  • Steve November 16, 2014, 12:45 PM

    So what happened in the end with the WWE stock??

    Reply
    • bigcajunman November 16, 2014, 3:00 PM

      I bailed at about $20 and am glad I did, it was a silly buy for me, and at the end of it, I didn’t feel confident in the business plans I was reading.

      Reply

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