A founder sells a billion dollars in Class A shares. The filing shows a declining stake. Social media declares they're "losing faith in their own company."
Meanwhile, the founder still holds Class B shares with 10x voting power and controls the entire board.
Dual-class share structures create the most consistently misread signals in SEC filings.
How dual-class structures work
Many tech companies issue two or more share classes with different voting rights:
| Company | Class A (public) | Class B (founder) | Voting ratio |
|---|---|---|---|
| Meta | 1 vote/share | 10 votes/share | 10:1 |
| Alphabet | 1 vote (GOOGL) | 10 votes (not traded) | 10:1 |
| Snap | 1 vote (SNAP) | 10 votes | 10:1 |
| Berkshire | 1 vote (BRK.B) | 10,000 votes (BRK.A) | 10,000:1 |
Class A shares trade publicly. Class B shares are typically held by founders, early investors, or the company's inner circle.
Why this distorts insider signals
The selling illusion
When a founder sells Class A shares:
- Form 4 shows shares disposed
- Screeners flag "insider selling"
- Class A ownership percentage drops
But their voting control hasn't changed because their Class B shares — the ones that actually control the company — are untouched.
The ownership illusion
If you calculate insider ownership using only the publicly traded class:
- Mark Zuckerberg appears to own ~13% of Meta (Class A economic interest)
- But he controls ~61% of voting power (through Class B shares)
The 13% number is misleading. The 61% number is the reality.
The dilution illusion
When a company issues new Class A shares (stock compensation, secondary offerings), the founder's Class A percentage drops. But their voting control stays the same because Class B shares aren't diluted in the same way.
How to get the real ownership picture
- Check the proxy statement (DEF 14A): The beneficial ownership table shows voting power by class
- Read Form 4 footnotes: They often disclose Class B holdings
- Look at the 10-K: The share structure section explains all classes and their rights
- Don't conflate economic interest with control: A founder can own 5% of equity but 60% of votes
The practical framework
| What you see | What it might mean |
|---|---|
| Founder sells Class A | Diversification, tax planning, or charitable giving — NOT necessarily losing conviction |
| Founder sells Class B | Actually meaningful — they're giving up control |
| Insider buying Class A | Bullish signal regardless of structure |
| Large Class A sale + no Class B change | The founder still controls the company completely |
Companies where this matters most
The dual-class distortion is most severe at:
- Meta (Zuckerberg: ~61% voting control)
- Alphabet (Page + Brin: majority voting control)
- Snap (Spiegel + Murphy: combined majority)
- Lyft, Pinterest, Zillow and many other tech IPOs from 2018-2021
For all of these companies, Form 4 filings on Class A shares tell you about liquidity events, not about conviction or control.
Originally published at 13F Insight
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