Unusual Share Classes

There are some quirks in European share classes that are worth observing. We highlight the more important here:

German Participation Shares

At present, on the German market, we include Participation Certificates in the Stock Directory (e.g. Bertelsmann). These certificates are referred as “Gewinnschein" or a "Genussschein"

Participation shares are equity paper which do not confer any ownership rights but grant the holder the right to participate in the net profit and the liquidation proceeds, as well as the right to subscribe to new shares.

As per the SIX exchange website, you can find some of the features of a "Gewinnschein" listed below:

  • This equity instrument is typical for Austria and Germany.
  • The owner of a "Gewinnschein" gets property rights but no voting rights.
  • The holder has the right to participate in the earnings.
  • There is no fixed distribution (in contrast to fixed income).
  • Some types of "Gewinnscheins" do not pay any dividend, and all the earnings are retained.
  • The holder also has the right to participate in case the company is liquidated.

See also this UK Discussion Board link.

Italian Savings Shares

Trading on the Milan Exchange in Italy are a few dozen “Savings Shares” listed across some of the most famous Italian companies such as Pirelli and Telecom Italia.

These are shares designed for smaller shareholders that don’t provide certain voting rights but do provide certain economic advantages with a preferential dividend that has similarities to preference shares. For example the Pirelli Savings Shares are defined as follows:

Savings shares are non-voting shares but nevertheless they benefit from a privileged economic status and certain rights established by law and by the Company’s Bylaws. In particular, holders of savings shares are entitled to a dividend of € 0.2233 (7% of € 3.19). If in any financial year these shares return a lower dividend, then the difference is made up in the following two financial years. Savings shares have higher dividends than ordinary shares which are rated at 2% percent of € 3.19.

Italian companies issuing Savings Shares are required by law to specify the substance of the financial privileges due to the shares and the conditions, limits, procedures and the terms for their exercise in a certificate of incorporation.