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How Dual-Class Shares Are Counted in Market Capitalization

Article Quant Q&A · Author: xan
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Summary

The document explains why market capitalization figures for a company with multiple publicly traded share classes may list one class rather than add the values shown for each ticker. Its answer focuses on Alphabet’s voting and nonvoting share classes and the separate class B shares, which are not publicly traded and carry greater voting power. The proposed convention is to calculate each listed class as though the company’s shares all belonged to that class, without adjusting for voting rights.

Under that convention, the market caps reported for different share classes represent alternative views of the same company’s equity value, so summing them would count the company more than once. The response offers a conceptual explanation, not a detailed market-cap formula or a survey of how data providers treat every dual-class company. It also does not establish that all listings use this convention; figures may depend on the provider’s methodology and share-class data.

Key ideas

  • Market capitalization can be reported separately for different publicly traded share classes.
  • Voting rights are not included in the valuation convention described in the answer.
  • Each class’s reported capitalization treats the company as though all shares belonged to that class.
  • Because class figures are alternative valuations of the same company, adding them can double-count its value.

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Full text
# Why does Alphabet market cap not include both GOOG and GOOGL?


# Why does Alphabet market cap not include both GOOG and GOOGL?












Alphabet's market capitalization is generally listed as the market cap of GOOG, such as in this Wikipedia top companies list. But GOOGL has about the same market cap. Why are they not combined for Alphabet the company? Are they linked in some way behind the scenes that makes summing redundant? And does the same hold for the other stocks with two ticker symbols (four more in S&P 500)?

(I know there is a similar sounding question, Correct Alphabet market cap calculation, but I think that one's more about discrepancies in the numbers rather than the summing.)

## Answer by Yehoshua Levin (score 2, accepted)

https://quant.stackexchange.com/a/39259

I will answer your question with another question. Being that there are class B stocks that are not publicly traded and have 10x the voting power how do we calculate those stocks being that that they are not publicly traded? The way we deal with this is not to take voting power into consideration when valuating the market cap. So when looking at class A stocks we look at it as if all the stocks are class A stocks and when looking at class C stocks we look at it as if all stocks are class C stocks, hence the discrepancy.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.