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After the spin-off of Hamilton Beach Brands from NACCO Industries I now own an equal number of A and B shares of Hamilton. Now here's the thing; the B shares have an interesting provision wherein they give a holder 10 votes a share (compared to 1 per share for A) but get converted to A shares if they are ever sold.

How is it possible to have a market for these shares? Anybody who "buys" a B share would actually get an A share. Is the market for these shares simply the market for the A shares, so you would sell your B shares at the market price of A?

JoeTaxpayer
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Koen vd H
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4 Answers4

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They aren't destroyed, they are -- in your own words -- "converted". Thus, at the time of sale (which means "now", since you can sell them at any time), they'll have the value of A shares.

RonJohn
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8

Is the market for these shares simply the market for the A shares, so you would sell your B shares at the market price of A?

Yes that is correct.

The clause may be to get an advantage for holding share "B". This means that they can exercise more influence. Obviously for promoters this is good. As this can't be discriminatory, its offered to everyone. Eventually retail individual investors would sell these and they lose the voting power [while other promoters who hold continue to enjoy more voting power]. If there are more than one promoter blocks, they are locked; i.e. they can't exit easily as they can't fetch a premium for their block, in fact if one of the promoter block sells; the buyer promoter is at disadvantage as he loses the enhanced voting power.

Brythan
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Dheer
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7

In theory there could be situations where the B shares would fetch a bigger price even if they get converted to A shares on sale, because someone might not like your voting power and could be willing to pay you to let go of those votes, thereby increasing their own influence, relatively speaking.

Anonymous
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While you will sell your B shares at the market price of the A shares, extinguishing the additional voting rights of the B shares by selling them could increase the market value of A shares, so you would get the benefit of that increase.

Mike Scott
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