If there’s one thing Motley Fool Answers hosts Alison Southwick and Robert Brokamp enjoy, it’s hearing from their listeners, so they particularly relish the monthly mailbag episode. But even they can be overwhelmed by the quantity and breadth of those queries, so this time around, they’ve invited a couple of friends to help out: serial podcast guest Jason Moser and Answers newbie Abi Malin.
In this segment, they use spice giant McCormick as the entry point to discuss businesses that issue multiple classes of stock. Is there a reason for retail investors to pay more for stock with voting rights? Is it really more valuable? Why is there a price gap?
A full transcript follows the video.
This video was recorded on July 31, 2018.
Alison Southwick: Our next question comes from Tanya. “Recently The Motley Fool’s Market Pass service recommended McCormick, and in doing research I noticed two ticker symbols [MKC] and [MKCV]. After Googling I learned the difference is nonvoting vs. voting or non preferred vs. preferred. When given a choice, should we always choose voting stocks? Do the stock prices always mirror each other? If and when I learn to trade options, do the prices of the options differ between voting and nonvoting stocks?”
Jason Moser: Tanya, I feel like the stars have aligned, here, for me to answer this question and I’m so happy that you used McCormick as an example, because it’s one of my favorite companies.
Southwick: It’s a spice company, right?
Moser: It is the spice company. It’s in everybody’s pantry all over this country.
Southwick: But it’s like five years old.
Moser: Not for people like me that cook dinner every night. I’m buying that stuff hand over fist every week it seems. It’s a good question.
It’s funny. We talk about the privilege of being able to vote. A lot of times we’re talking about it just in our democracy, but I think a lot of times that also translates to investing. And it is important, I think, to recognize that as a shareholder that means you are a part owner of the business and you have a voice.
Now with that said — and I’m sure a lot of people will disagree with this — I personally couldn’t care less about it. I just don’t care. The main reason why is because I understand the reality of the fact that I will have no say-so in what that company does.
Southwick: The principle, Jason! The principle of voting!
Moser: Exactly, it’s the principle. It’s the principle. But here’s why I’m saying this. I do agree with you. I like the principle. I like being able to have my voice heard and I do. They make it very easy. Your brokerage will send you out the documents and you just click a few buttons and vote. It is great to get that on the record for posterity.
The problem is when you have a company and you see a disparity in the share price. I personally would not pay more for voting privileges and I think a good example that a lot of investors could relate to other than McCormick would be Under Armour. Under Armour recently split and they now have [UA] and [UAA]. One share gives you the vote and one share gives you no vote understanding full and well that founder and CEO Kevin Plank is in full control of the business no matter what you vote.
So I appreciate the ability to do it. I appreciate the principle. With that said, I would not pay more for it.
Robert Brokamp: Do the prices track each other? It sounds to me like there is a difference sometimes.
Moser: Sometimes they do. It seems over time they get a little bit closer. It seems that delta closes over time. We’ve seen it with Zillow, with Alphabet, and we’re seeing a bit more with Under Armour. So I think it’s OK if, all things being equal, to get the voting share. I just wouldn’t pay more it.
Abi Malin: And going back to our previous question, as a retail investor your vote’s not going to have a big-enough impact.
Moser: It’s not that your vote doesn’t matter.
Southwick: No, that’s exactly what you said. You said my vote doesn’t matter.
Brokamp: Why do you hate democracy?
Moser: Hey, let’s not get into that, OK? I love democracy.
Southwick: Go back to Canada with Guillaume. Wait, do they have a democracy over there?
Southwick: Who doesn’t love Canada? Come on.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Abi Malin has no position in any of the stocks mentioned. Alison Southwick has no position in any of the stocks mentioned. Jason Moser owns shares of UAA and UA. Robert Brokamp, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends GOOGL, GOOG, UAA, UA, ZG, and Z. The Motley Fool recommends MKC. The Motley Fool has a disclosure policy.