finance sec
Low-Ball Buyout Offers in Multi-Class Share Structures: Protecting the Interests of Series A Stockholders
<p>In USA listed-stock (even ADR), when there are two series (classes) of stocks: A (common) and B. Say, series B is not tradable but has above 90% of voting power despite the number of shares are much smaller compared to series A, let also assume no conversion is possible between the types of shares. In short the scenario is that series B holders represent less 50% of ownership, but more than 50% of voting power.</p>
<p>Given that, can the owner(s) of Series B accept a low-ball buyout offer (might be even with discount to the market value) - even theoretically $1?  is that legal? what protects the interest of series A stockholders?</p>
<p>(*) Due to their percentage of ownership they are not so much harmed by selling the company in absurdly low price, and might have received (being usually executive of the company) some compensation in the transaction.</p>
<p><strong>Edit:</strong> to clarify the question, let's consider Twitter example. Musk offered to buy Twitter, which triggered a shareholder vote that passed despite more <a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/0001418091/000119312522244289/d403306d8k.htm" rel="nofollow noreferrer">than 4M shareholders votes that were against.</a> But, as I understood, they were forced to accept the majority vote and their shares were converted to cash as in the offer. I ask, then, in case of discord between voting rights and ownership what happens? do the voting rights do not apply in this case? or they rather they do and the owners are in &quot;danger&quot;?</p>
<p>Basically, my question also applied where entity holds &gt; 50% of ownership (and voting rights) - what prevent this entity (or for that matter - separated legal entity that has close ties with that entity) from offering to buy the company for one cent and make it private? (and then even sell?). I could not find the legal mechanism that prevents this kind of action.</p>

<blockquote>
<p>Given that, can the owner(s) of Series B accept a low-ball buyout
offer (might be even with discount to the market value) - even
theoretically $1? is that legal? what protects the interest of series
A stockholders?</p>
</blockquote>
<p>The Class A shareholders don't have to accept offers to buy their shares of stock unless they believe the amount offered is sufficient.</p>
<p>The Class B shareholders with a majority of the vote don't control when particular Class A shareholders do or do not sell their shares.</p>
<p>Historically, a tender offer to buy shares of stock of a public company has taken a premium over the current market value to induce the shareholders subject to the offer to sell their shares.</p>
