Separating cash-flow and voting right with options

L

littleluke

Hi guys,

I have a question regarding hedging. There is an ongoing discussion whether the existence of multiple share classes with different voting rights is beneficial in a corporate governance sense. However, I was wondering if it was theoretically possible to reproduce the separation of cash-flow rights and voting rights even in case of only a single share class. If I own a share, is it possible to completely hedge the risk so that I solely own the voting right? And how relevant are transaction costs in this case?

I know it is kind of a basic question I am (as you may guess from my question) very unexperienced in this topic. Sorry about that and thanks in advance!
 
You can buy the shares with voting rights and short ones without. You should know that if it's not convertible, that there is risk. I have seen those spreads widen quite a bit.

Not sure why anybody would want to do that.
 
Take GOOGL and GOOG. GL has voting right whereas G doesn't. So, if you buy GL and short G, you should theoretically only own the voting rights. Shorting however costs you some $ so it is not without risk. If you plot the difference over time, you should be able to see if that strategy works for you.
 
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