Alphabet Stock
An alphabet stock refers to a separate class of common stock that is tied to a specific subsidiary of a corporation. It is called an alphabet stock because the classification system used to identify each class of common stock uses letters to distinguish it from the parent company's stock. Companies with complex capital structures and several subsidiaries and divisions may have a combination of several different varieties of common stock classes, with each share class carrying different voting rights and dividend rates. However, this new asset class of stock may have limited voting rights, allowing insiders and management to maintain control of the firm. Alphabet shares may be indicative of a complex capital structure. When alphabet stock is issued, typical nomenclature is to see a period and letter behind the existing stock symbol, indicating a separate share class.
What Is Alphabet Stock?
An alphabet stock refers to a separate class of common stock that is tied to a specific subsidiary of a corporation. More broadly, it refers to shares of common stock that are distinguished in some way from other common stock of the same company.
It is called an alphabet stock because the classification system used to identify each class of common stock uses letters to distinguish it from the parent company's stock. Alphabet stock may have different voting rights from the parent company's stock.
Understanding Alphabet Stock
Publicly traded companies may issue alphabet stock when purchasing a business unit from another company. This unit becomes a subsidiary of the acquirer, and holders of the alphabet stock are only entitled to the earnings, dividends, and rights of the subsidiary, not the entire acquirer. A similar situation would be the issuance of tracking stock, where a firm issues a subclass of shares on an existing subsidiary.
Alternatively, like with all stock issuance, a firm may issue a new class of common stock to raise capital. However, this new asset class of stock may have limited voting rights, allowing insiders and management to maintain control of the firm.
Alphabet shares may be indicative of a complex capital structure. Companies with complex capital structures and several subsidiaries and divisions may have a combination of several different varieties of common stock classes, with each share class carrying different voting rights and dividend rates.
Special Considerations
When alphabet stock is issued, typical nomenclature is to see a period and letter behind the existing stock symbol, indicating a separate share class. So, for example, if ABC company, whose stock symbol is ABC, issued Class A and B shares, the new ticker for these shares would be ABC.A. and ABC.B., respectively.
There is no standard format for alphabet stock in terms of which share class has more voting rights if voting rights differ among them. Typically, Class A shares would have more rights than Class B, and so forth, but it is important to read the details about share classes before investing. To learn more about the issuance of multiple share classes by a firm, check out related writing on the topic.
Related terms:
Class of Shares
Class of shares is an individual category of stock that may have different voting rights and dividends than other classes that a company may issue. read more
Classified Shares
Classified shares are different classes of common stock, each with different voting rights, ownership rights and dividend rates. read more
Common Stock
Common stock is a security that represents ownership in a corporation. read more
Complex Capital Structure
A complex capital structure is a construct where companies offer multiple forms of securities, rather than solely offering a single class of common stock. read more
K and Function
K is added to the end of a Nasdaq ticker symbol to indicate that the stock has no voting rights. read more
L and Function
L is an extension added to stock tickers to indicate that it is one several types of preferred security. It also indicates a London Stock Exchange stock. read more
P (Fifth-Letter Identifier)
When used as a fifth-letter identifier in a ticker symbol, the letter P typically indicates that a security is a first preferred issue. read more
Parent Company
A parent company is a maintains a majority interest in another company, giving it control of its operations. read more
Share Class
Share class refers to different types of stock a company or mutual fund issues. Usually labeled "Class A," "Class B," and so forth, they have different characteristics, costs, and rights. read more