What Are Shares of Class A Common Stock?
When you own a share of Class A common stock, you own a small piece of the company that issued the stock. Common stock is the kind that people are usually talking about when they refer to a company's stock rising or falling. The meaning of "Class A" depends on the company.
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Shares
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When a company sells stock to the public, what it's actually doing is selling ownership in the company. Each share of stock represents one piece of that ownership. In many cases, it's an extremely small piece: As of January 2011, for example, Microsoft had more than 8.4 billion shares outstanding. But it's a legitimate piece nonetheless. Whether you own one share or 1 million, you are an owner -- and if the company turns a big enough profit, you are entitled to a share of that profit. As of 2011, for example, Microsoft was paying a dividend of 16 cents per share every three months.
Common
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A company can issue several types of stock. "Common" stock is a company's basic shares. Owning common shares gives you the right to vote on issues put before shareholders and the right to receive dividends -- if the company is paying dividends. The more common shares you own, the more votes you get and the larger your dividend. Common stock is distinguished from "preferred" stock. Preferred shares usually don't have voting rights, but their dividends are fixed at a certain amount and guaranteed, regardless of the company's profit.
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Class A
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Companies can further divide their stock by issuing different classes of common shares. For example, one class could carry one vote per share, while a separate class could carry two votes per share. Usually, these classes are simply given letter designations: Class A, Class B and so on. There's no requirement that any particular letter stand for any specific kind of stock, so whether Class A is "regular" common stock or an enhanced version will depend on the company that issued it.
Conversions
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Many companies offer a way to turn one type of stock into another. For example, an investor holding non-voting preferred shares or lower-priced Class B shares might see that Class A common shares are offering a higher dividend, or their price is soaring. If his preferred or Class B shares are "convertible," he can trade them for common shares. The company sets a conversion ratio for these exchanges, such as one share of Class A common stock for every 1.5 shares of preferred or Class B. Companies often set restrictions on conversions, such as requiring that you own the shares for a certain amount of time before converting them.
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