Question


Jeremy M

How is a company publicly traded but privately controlled?

Companies like WWE and the Dow Jones are publicly traded on the open stock market but privately controlled by the key people in the company. How is that possible? Millions of people buy WWE stock and money is invested in their company by the public but Vince McMahon and his wife, son, and daughter hold 96 percent of the voting power. How is that possible? Is it that they own a different type of stock like common stock and everyone else owns preferred stock? Want to start a corporation and would like to know how I could make my company public but privately control it. Thanks for the help.

2 years ago - 1 answers

Best Answer

Chosen by Asker

Excellent question, and your 'guess' is correct. The most common situation of a publicly traded corporation being privately controlled occurs when the corporation has two (or more) classes of stock, with the voting stock being controlled by the insiders. Note that the two classes of stock do not have to include preferred stock: there could be two classes of voting stock, with (for example) Class A stock (which is privately held) electing 10 members of the board and Class B stock (which is publicly traded) electing 5 members of the board. A second common situation occurs when a privately-owned corporation will decide to go public, so it will register and issue shares that will be publicly traded, but the company (and/or "insiders") sell less than 50% of the stock to the public, and they retain 51% or more. A third common situation occurs when a significant but minority percentage of the shares of a HUGE corporation is acquired. For example, many of the world's largest corporations can be controlled by acquiring only 15% or 20% of the outstanding stock. The reason for this is that the corporation is so large and the shareholding so diversified that there is no real majority to oppose the determined minority. Hope this helps.

by Tim F

2 years ago

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