Control stock is the collective term for shares of stock in the possession of shareholders who have a controlling interest in a given company. This controlling interest may be made manifest by one shareholder controlling a majority of the outstanding shares of the company, or at least having enough shares in hand to exert a great deal of influence on the direction of the corporation. The term is also applied when two or more shareholders with significant share of stock choose to unite on a given matter and vote as a bloc, thus representing a majority share of the outstanding stock.
Holding control stock in a given company is sometimes a favorable position for an investor. This is especially true when the investor wishes to be actively involved in the future of the corporation. An investor with control stock usually makes it a point to be present at all shareholder meetings, and communicates regularly with officers of the company. Generally, an investor who has control stock and takes an active interest in the performance of the corporation will have a working knowledge of the industry that the company is associated with.
Along with referring to a substantial number of shares being under the control of an investor or group of investors, control stock can also be used as a term to refer to a particular class or type of stock issued by the company. This is often the case when a corporation issues both A and B class stock options. In many instances, Class A stock will carry more privileges than Class B. One of the privileges is often additional votes per share. In this scenario, the Class A shares would be considered control stock, since the shares carry greater voting power and thus can be used to exert a greater degree of control than Class B shares of stock.
In either application, the underlying principle of control stock is that it is a mechanism that makes it possible to exert a great deal of influence on the future of the issuing corporation. Whether the control stock is simply a majority number of shares held by an investor or a class of stock that authorizes additional voting privileges, the end result is still the potential for persons in control of the shares to actively participate in the future direction of company.
