Consider a firm that has dual-class shares with 250 million Class A shares (having 1 vote each)and 75 million nonlisted Class B shares having 10 votes each.The shares are otherwise identical.If one requires 51% of the votes to control the firm,what number of Class B shares must one control?

Question

Quizplus · Accepted Answer

To have 51% of the votes, we need to solve for the number of Class B shares required to exceed 50% of the total votes:

Total votes = (250 million Class A shares * 1 vote each) + (75 million Class B shares * 10 votes each) 
= 250 million + 750 million 
= 1 billion votes

To control the firm, one must have more than 50% of the votes, which is more than 500 million votes.

Let X be the number of Class B shares needed to exceed 500 million votes, then:

X * 10 + 250 million < 1 billion
X < 75 million

Therefore, one must control less than 75 million Class B shares but enough to exceed 500 million votes. The closest option is B, 51 million Class B shares.

Consider a Firm That Has Dual-Class Shares with 250 Million