Comcast Board OKs Plan to Streamline Stock Structure

Comcast Corp. is moving to streamline its stock structure by reclassifying two of the company’s three types of outstanding shares.

On Sunday, Comcast’s board of directors approved a proposal to reclassify its Class A Special Common Stock as the more widely held Class A Common Stock. The common shares come with voting rights while the special shares do not.

Under the proposal, the special shares would be swapped with common stock on a one-to-one basis and would come with voting rights. At present there are about 347 million Class A Special shares outstanding, compared to nearly 2.1 billion Class A shares.

The switch would not effect Comcast’s Class B shares, all of which are held by chairman-CEO Brian Roberts, whose father, Ralph Roberts, founded the cable pioneer in 1963. Those super-voting shares, which are not publicly traded, would remain intact, giving Roberts control of 33 and 1/3% of the voting power in the company.

The move to reclassify the Class A Special shares was described as a bid to end investor confusion and improve the overall liquidity of Comcast.

Comcast went public with Class A shares in 1972. The special shares with no voting rights were issued starting in 1986 with the goal of using them as currency for acquisitions and for employee stock awards.

By the time Comcast entered into its transformative 2002 acquisition of AT&T Broadband, it issued Class A shares to AT&T shareholders in the stock component of that $52 billion deal. That greatly expanded the float of Class A shares, which meant that those were the shares included in key stock indexes including the Standard & Poors 500.

The push to streamline the stock structure began this summer when the S&P changed its protocol to include all classes of stock for its member companies. Comcast’s voting Class A shares had traded at a higher value than the the Special Class shares, but the dynamic shifted once both stocks were added to the index. The spread between the stock has been as high as 80 cents or more in recent weeks, but the gap narrowed to 18 cents by close of trading on Monday following the reclassification plan announcement.

To avoid investor confusion and give Comcast liquidity overall, the board moved to approve the proposal that was announced Monday. The plan still needs the blessing of the Securities and Exchange Commission, after which Comcast will put it to a vote of shareholders. It has to be approved by a majority of the holders of all three classes of stock. Roberts has informed the board he will support the proposal.

“We believe the reclassification of (Special Class shares) into (Class A) will benefit Comcast’s shareholders in many ways, including by eliminating investor confusion caused by having two classes of publicly traded stock and improving the trading liquidity for all shareholders,” Comcast said in a statement. “The Comcast Board of Directors considered these and other factors and believes the one-for-one reclassification ratio is fair to and in the best interests of all of our shareholders.”

The move will expand voting rights to all holders of publicly traded Comcast shares and shareholder voting power will remain at just 66 and 2/3%, with Roberts controlling the rest. But the absorption of 347 million shares will dilute the voting power of individual Class A shareholder by 9.5%, according to Comcast’s preliminary proxy filing. At present each Class A share accounts for 0.135% of voting power, which will drop 0.1160% if the proposal is approved.

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