28/5/26
Dual-Class Shares: The Fine Print Every Investor Should Know
Dual-Class Shares: The Fine Print Every Investor Should Know
When SpaceX filed its IPO documents last week, buried in the fine print was something that revived one of Wall Street's oldest debates: a structure that gives Elon Musk the power of ten votes for each share, while the shares available to ordinary investors will carry just one.
It's called a dual-class share structure, and it's more common than you might think.
Here's what it means, and what it means for you.
What Are Dual-Class Shares?
Most companies issue one type of share, where each share gets one vote on company decisions.
Instead, dual-class structures create at least two types of shares with different voting rights, where one class carries significantly more voting power than the other.
The high-vote shares are typically held by founders and insiders.
The low-vote shares are what regular investors buy on the public market.
In SpaceX's case, Class A shares (the ones available to public investors) carry one vote, and Elon Musk will own a majority of the Class B shares after the IPO.
That means he’ll have effective control over almost every major decision, even if public shareholders own a large portion of the company's economic value.
This structure isn't actually that unusual. Alphabet, the parent company of Google, has a similar setup, and so does Meta. Berkshire Hathaway, Palantir, and others have variations of the same structure.
Why Founders Love This Setup
It's not hard to see why founders are fans of this kind of power. Nobody wants to spend years building something transformational only to get voted out by shareholders who are focused on next quarter's earnings.
A founder with super-voting shares doesn't have to worry about any of that. They can ignore activist campaigns, resist pressure to cut research budgets for a quick profit boost, and pursue a ten-year strategy without being voted out mid-way through.
For investors who believe strongly in a specific founder's vision, this can feel like a reasonable trade-off.
And the performance data does offer some support for that view - a 2024 study published in the Harvard Law School Forum on Corporate Governance found that dual-class companies in the Russell 3000 index outperformed single-class peers on average over five and ten-year periods.
Berkshire Hathaway is the most famous example of a founder-controlled structure that has delivered exceptional long-term returns.
But Control Can Become a Problem
The other side of this is equally important.
When you buy Class A shares in a dual-class company, you’re buying economic exposure without meaningful democratic rights. One person, or a small group of insiders, can outvote the entire public shareholder base regardless of how much of the company ordinary investors collectively own.
Public shareholders then have limited ability to vote out underperforming management, push for changes in strategy, or raise concerns about pay, governance, or direction.
Governance advocates call this the "founder knows best" problem: when leaders are insulated from accountability, they can become less responsive to warning signs and less open to necessary change.
The same Harvard research that showed outperformance over five to ten years also noted that this premium tends to fade, with dual-class firms often trading at a discount to single-class peers around seven to nine years after listing, as questions about leadership succession and long-term strategy start to weigh on investors.
There's also the question of what happens when things go badly - the structure that protects a founder's vision can eventually protect poor decisions, too.
What to Think About as a Regular Investor
Most everyday investors will access companies like SpaceX through funds rather than buying IPO shares directly. That means dual-class governance is already present in many global equity and tech ETFs.
If you invest in individual companies, it’s worth finding out who actually controls the company. Does the founder hold super-voting shares? Can public shareholders meaningfully influence decisions, or are they effectively passengers? This information is in the IPO prospectus and on data sites like Bloomberg or the company's investor relations page.
Also ask, has that control been used well? Some founder-controlled companies have delivered extraordinary long-term value, while others have seen founders make decisions that hurt shareholders while facing little accountability.
How comfortable are you with the trade-off? Some investors are happy to exchange voting rights for potential access to high-growth businesses they couldn't reach otherwise. Others prefer companies where one share means one vote, even if that means skipping certain high-profile listings.
Neither position is wrong, but it's worth making it a conscious choice rather than an accidental one.
The Bigger Picture
SpaceX's IPO is part of a broader trend. Founder-led, tech-heavy companies are increasingly coming to market with structures designed to keep power concentrated at the top, even as they raise money from millions of ordinary investors.
Dual-class shares aren't inherently good or bad, but it’s worth understanding when not all shares are created equal.
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