What Is Aktiengesellschaft (AG)?

AG is an abbreviation of Aktiengesellschaft, which is a German term for a public limited company. This type of company shares are offered to the general public and traded on a public stock exchange. Shareholders’ liability is limited to their investment. The shareholders are not responsible for the company’s debts, and their assets are protected in case the company becomes insolvent. 

Understanding Aktiengesellschaft

Aktiengesellschaft is a German term made up of words meaning share and corporation. An AG is a business owned by shareholders which may be traded on a stock marketplace. Shareholders exercise power over controlling policies at regularly scheduled general meetings. The managing board decides on all operational matters, and the supervisory board carries them out.

German companies that are publicly traded are designated as such by the letters ‘AG’ after the company name. ‘AG’ is an abbreviation for the German word Aktiengesellschaft, which literally translates to ‘stock corporation’ or ‘shares corporation’ in English. AG companies trade publicly on stock exchanges with the majority of companies trading on the DAX.

Some of the largest German AG corporations include its automotive manufacturers:

Establishing an AG

Setting up an AG requires five or more members. An Aktiengesellschaft (AG) is subject to the Stock Corporation Act. This act involves share capital of approximately $56,000, with at least half paid at registration. The business owner will enlist the services of an attorney or bank in preparing documentation for registration.

The Aktiengesellschaft’s name will come from the enterprise’s purpose and contains the word Aktiengesellschaft in its title. The articles of association include the corporation’s name, registered office, share capital, each shareholder’s contribution, and details regarding the shares. A court or notary will authenticate the articles of association. 

The required capital is deposited into a banking account, and the notarized documents and signed application submitted to the Commercial Registry Office. The AG will become a legal entity within seven days if all materials are in order. The Office will issue a certificate of registration, and publish news of the establishment in the Swiss Official Gazette of Commerce.

AG Oversight

An AG has a managing board of one or more members appointed by and reporting to, the supervisory board of three or more members. An Aktiengesellschaft (AG) with a share capital of $3 million or more has two or more managing board members. An AG employing over 500 workers will have employee representatives occupying one-third of the supervisory board. If the employee number exceeds 2,000, employee representatives will fill half of the board. Also, the articles of association may limit the number of members.

Auditors check the corporation’s financial documents. Meeting three or more of the following conditions for two or more years in a row requires an ordinary company audit: the company has more than 50 full-time employees; revenues exceed $2 million, or the balance sheet exceeds $100,000.

GMbH vs. AG

GmbH is another common business extension primarily known for its use in Germany. Like most countries, Germany has two distinct classifications for companies: publicly traded and privately held. While AG refers to public companies, the acronym ‘GmbH’ is used to designate certain private entities and is written after a company’s name. The letters stand for Gesellschaft mit beschränkter Haftung which translated literally, means a ‘company with limited liability.’

What Is the Average Daily Rate (ADR)?

The average daily rate (ADR) is a metric widely used in the hospitality industry to indicate the average revenue earned for an occupied room on a given day. The average daily rate is one of the key performance indicators (KPI) of the industry.

Another KPI metric is the occupancy rate, which when combined with the ADR, comprises revenue per available room (RevPAR), all of which are used to measure the operating performance of a lodging unit such as a hotel or motel.

Understanding the Average Daily Rate (ADR)

The average daily rate (ADR) shows how much revenue is made per room on average. The higher the ADR, the better. A rising ADR suggests that a hotel is increasing the money it’s making from renting out rooms. To increase the ADR, hotels should look into ways to boost price per room.

Hotel operators seek to increase ADR by focusing on pricing strategies. This includes upselling, cross-sale promotions, and complimentary offers such as free shuttle service to the local airport. The overall economy is a big factor in setting prices, with hotels and motels seeking to adjust room rates to match current demand.

To determine the operating performance of a lodging, the ADR can be measured against a hotel’s historical ADR to look for trends, such as seasonal impact or how certain promotions performed. It can also be used as a measure of relative performance since the metric can be compared to other hotels that have similar characteristics, such as size, clientele, and location. This helps to accurately price room rentals.

Calculating the Average Daily Rate (ADR)

The average daily rate is calculated by taking the average revenue earned from rooms and dividing it by the number of rooms sold. It excludes complimentary rooms and rooms occupied by staff.


$\text{Average Daily Rate} = \frac{\text{Rooms Revenue Earned}}{\text{Number of Rooms Sold}}$Average Daily Rate=Number of Rooms SoldRooms Revenue Earned​

Example of the Average Daily Rate (ADR)

If a hotel has $50,000 in room revenue and 500 rooms sold, the ADR would be $100 ($50,000/500). Rooms used for in-house use, such as those set aside for hotel employees and complimentary ones, are excluded from the calculation.

Real World Example

Consider Marriott International (MAR), a major publicly traded hotelier that reports ADR along with occupancy rate and RevPAR. For 2019, Marriott’s ADR increased by 2.1% from 2018 to $202.75 in North America. The occupancy rate was fairly static at 75.8%. Taking the ADR and multiplying it by the occupancy rate yields the RevPAR. In Marriott’s case, $202.75 times 75.8% equates to a RevPAR of $153.68, which was up 2.19% from 2018.

The Difference Between the Average Daily Rate (ADR) and Revenue Per Available Room (RevPAR)

The average daily rate (ADR) is needed to calculate the revenue per available room (RevPAR). The average daily rate tells a lodging company how much they make per room on average in a given day. Meanwhile, RevPAR measures a lodging’s ability to fill its available rooms at the average rate. If the occupancy rate is not at 100% and the RevPAR is below the ADR, a hotel operator knows that it can probably reduce the average price per room to help increase occupancy.

Limitations of Using the Average Daily Rate (ADR)

The ADR does not tell the complete story about a hotel’s revenue. For instance, it does not include the charges a lodging company may charge if a guest does not show up. The figure also does not subtract items such as commissions and rebates offered to customers if there is a problem. A property’s ADR may increase as a result of price increases, however, this provides limited information in isolation. Occupancy could have fallen, leaving overall revenue lower.

What Is Alphabet Stock?

An alphabet stock refers to a separate class of common stock that is tied to a specific subsidiary of a corporation. More broadly, it refers to shares of common stock that are distinguished in some way from other common stock of the same company.

It is called an alphabet stock because the classification system used to identify each class of common stock uses letters to distinguish it from the parent company’s stock. Alphabet stock may have different voting rights from the parent company’s stock.

Understanding Alphabet Stock

Publicly traded companies may issue alphabet stock when purchasing a business unit from another company. This unit becomes a subsidiary of the acquirer, and holders of the alphabet stock are only entitled to the earnings, dividends, and rights of the subsidiary, not the entire acquirer. A similar situation would be the issuance of tracking stock, where a firm issues a subclass of shares on an existing subsidiary.

Alternatively, like with all stock issuance, a firm may issue a new class of common stock to raise capital. However, this new asset class of stock may have limited voting rights, allowing insiders and management to maintain control of the firm.

Alphabet shares may be indicative of a complex capital structure. Companies with complex capital structures and several subsidiaries and divisions may have a combination of several different varieties of common stock classes, with each share class carrying different voting rights and dividend rates.

Special Considerations

When alphabet stock is issued, typical nomenclature is to see a period and letter behind the existing stock symbol, indicating a separate share class. So, for example, if ABC company, whose stock symbol is ABC, issued Class A and B shares, the new ticker for these shares would be ABC.A. and ABC.B., respectively.

There is no standard format for alphabet stock in terms of which share class has more voting rights if voting rights differ among them. Typically, Class A shares would have more rights than Class B, and so forth, but it is important to read the details about share classes before investing. To learn more about the issuance of multiple share classes by a firm, check out related writing on the topic.

What Was the 500 Shareholder Threshold?

The 500 shareholder threshold for investors is an outdated rule required by the Securities and Exchange Commission (SEC) that triggered public reporting requirements of a company when it reached that many or more distinct shareholders. Section 12(g) of the Securities Exchange Act of 1934 calls for issuers of securities to register with the SEC and begin public dissemination of financial information within 120 days of the end of a fiscal year.

New regulations now require a 2,000 shareholder threshold.

Understanding the 500 Shareholder Threshold

The 500 shareholder threshold was originally introduced in 1964 to address complaints of fraudulent activity appearing in the over-the-counter (OTC) market. Since firms with fewer than the threshold number of investors were not required to disclose their financial information, outside buyers were not able to make fully informed decisions regarding their investments due to a lack of transparency and allegations of stock fraud.

The 500 shareholder threshold forced companies that had more than 499 investors to provide adequate disclosure for the protection of investors and for oversight by regulators. Although the company could remain privately-held, it would have to file public documents in similar fashion to those of publicly traded companies. If the number of investors fell back below 500, then the disclosures would no longer be required.

Private companies generally avoid public reporting as long as possible by keeping the number of individual shareholders low, which is helpful because mandatory reporting can consume a great deal time and money and also places confidential financial data in the hands of competitors.

The 2,000 Shareholder Threshold

With the ascendancy of startup firms in the technology sector in the 1990s and 2000s, the 500 shareholder threshold rule became an issue for swiftly growing companies like Google and Amazon that desired to remain private even as it attracted more private investors. While other factors were supposedly in play in the decision of these well-known giants to go public, the 500 rule was a key consideration, according to market observers.

The threshold was thus increased to 2,000 shareholders in 2012 with the passage of the Jumpstart Our Business Startups (JOBS) Act. Now, a private company is allowed to have up to 1,999 holders of record without the registration requirement of the Exchange Act. The current 2,000-shareholder threshold gives the new generation of super-growth companies a bit more privacy and breathing room before they decide to file for an initial public offering (IPO).