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> This incident fails to explain why common stockholders should have zero voting power. They don't have zero voting power. They have greatly reduced voting pow

> This incident fails to explain why common stockholders should have zero voting power. They don't have zero voting power. They have greatly reduced voting power. Huge difference. Snap Inc. is a delaware corporation. The shareholders (DE = shareholder; NY = stockholder) have certain non-waivable rights as a matter of delaware law. To put it another way: The founders create the company, including designing the ownership structure. The fact of the matter is, common shareholders are willing to buy into this structure, even without very strong voting rights, at a huge valuation. The proof is in the pudding - why should the founders have done otherwise? No one is forcing the common shareholders to buy into the Company - they are doing so knowing full well that they have very low voting rights. So, why should management give up control to common stockholders? What benefit is there? The only answer, in my role as a corporate lawyer, is when the company cannot raise money on terms more favorable to the founders and management. That was not the case with Snap. And it worked out brilliantly.

argigg 10y ago
It's a little early to declare mission accomplished. The IPO hasn't actually happened yet. It will be hard to know if limited shareholder supervision reduces the value of the company. But if the IPO is a bust, a lot of people will wonder.
- libertymcateer 10y ago
  Fair enough - but the S1 is filed. The IPO is set for Wednesday. As soon as the shares are sold Wednesday morning, it's champagne time. Granted there is a lockup period for company insiders, but unless they sink the ship in 6 months, they are going to be racing their new yachts by thanksgiving.
jzl 10y ago
> They don't have zero voting power. They have greatly reduced voting power. Huge difference. I have yet to see a news outlet describe the SNAP common stock as you have. Do you have any references? A few of many example articles describing how their common stock will have 0 voting rights: https://www.fool.com/investing/2017/02/08/your-snap-shares-wont-get-you-any-votes.aspx https://www.fool.com/investing/2017/02/08/your-snap-shares-w... http://fortune.com/2017/02/07/snapchat-ipo-snap-stock-buy/ http://fortune.com/2017/02/07/snapchat-ipo-snap-stock-buy/ "Snap acknowledged in its IPO filing that it would likely be the first company to sell non-voting stock in an IPO on a U.S. stock exchange." If all you mean is that Delaware law allows certain kinds of lawsuits by stockholders, then no, IMO, that is not the same as having voting rights. And yes I understand that it not unusual for common stock in public companies to have greatly reduced voting rights. There is still a difference between that and none.
- libertymcateer 10y ago
  Right, well, the solution is to check the S1, because it, and nothing else, controls: https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htm https://www.sec.gov/Archives/edgar/data/1564408/000119312517... The Class A common stock is non-voting and is not entitled to any votes on any matter that is submitted to a vote of our stockholders, except as required by Delaware law. Delaware law would permit holders of Class A common stock to vote, with one vote per share, on a matter if we were to: • change the par value of the common stock; or • amend our certificate of incorporation to alter the powers, preferences, or special rights of the common stock as a whole in a way that would adversely affect the holders of our Class A common stock. In addition, Delaware law would permit holders of Class A common stock to vote separately, as a single class, if an amendment of our certificate of incorporation would adversely affect them by altering the powers, preferences, or special rights of the Class A common stock, but not the Class B common stock or Class C common stock. As a result, in these limited instances, the holders of a majority of the Class A common stock could defeat any amendment to our certificate of incorporation. For example, if a proposed amendment of our certificate of incorporation provided for the Class A common stock to rank junior to the Class B common stock and Class C common stock with respect to (i) any dividend or distribution, (ii) the distribution of proceeds were we to be acquired, or (iii) any other right, Delaware law would require the vote of the Class A common stock, with each share of Class A common stock entitled to one vote per share. In this instance, the holders of a majority of Class A common stock could defeat that amendment to our certificate of incorporation. Moreover, if an amendment to our certificate of incorporation would alter the powers, preferences, or special rights of the Class A common stock and either the Class B common Stock or the Class C common stock in a way that would affect them adversely compared to the unaffected class, Delaware law would permit the holders of Class A common stock to vote with the other adversely affected class of common stock together as a single class. For example, if a proposed amendment to our certificate of incorporation provided for the Class A common stock and Class B common stock to rank junior to the Class C common stock with respect to (i) any dividend or distribution, (ii) the distribution of proceeds were we to be acquired, or (iii) any other right, Delaware law would require the vote of the Class A common stock and Class B common stock voting together as a single class, with each share of Class A common stock and Class B common stock entitled to one vote per share. In this instance, the holders of a majority of the Class A common stock and Class B common stock, voting together as a single class, could defeat that amendment to our certificate of incorporation. --- So, yes, the class is called "non-voting" but, as I point out, they still do have powers to vote. Just very limited ones. However, I am perfectly willing to admit that you do have a point that this is literally as de minimis as it gets. This is distinctly unusual. But it is still not zero voting power - just literally as close as delaware law allows.
libertymcateer 10y ago
I got NY and DE switched - NY = shareholder, DE = stockholder. I actually have that on a sticky on my desk. Sadly.

argigg 10y ago

It's a little early to declare mission accomplished. The IPO hasn't actually happened yet. It will be hard to know if limited shareholder supervision reduces the value of the company. But if the IPO is a bust, a lot of people will wonder.

libertymcateer 10y ago
Fair enough - but the S1 is filed. The IPO is set for Wednesday. As soon as the shares are sold Wednesday morning, it's champagne time. Granted there is a lockup period for company insiders, but unless they sink the ship in 6 months, they are going to be racing their new yachts by thanksgiving.

jzl 10y ago

> They don't have zero voting power. They have greatly reduced voting power. Huge difference. I have yet to see a news outlet describe the SNAP common stock as you have. Do you have any references? A few of many example articles describing how their common stock will have 0 voting rights: https://www.fool.com/investing/2017/02/08/your-snap-shares-wont-get-you-any-votes.aspx https://www.fool.com/investing/2017/02/08/your-snap-shares-w... http://fortune.com/2017/02/07/snapchat-ipo-snap-stock-buy/ http://fortune.com/2017/02/07/snapchat-ipo-snap-stock-buy/ "Snap acknowledged in its IPO filing that it would likely be the first company to sell non-voting stock in an IPO on a U.S. stock exchange." If all you mean is that Delaware law allows certain kinds of lawsuits by stockholders, then no, IMO, that is not the same as having voting rights. And yes I understand that it not unusual for common stock in public companies to have greatly reduced voting rights. There is still a difference between that and none.

libertymcateer 10y ago
Right, well, the solution is to check the S1, because it, and nothing else, controls: https://www.sec.gov/Archives/edgar/data/1564408/000119312517029199/d270216ds1.htm https://www.sec.gov/Archives/edgar/data/1564408/000119312517... The Class A common stock is non-voting and is not entitled to any votes on any matter that is submitted to a vote of our stockholders, except as required by Delaware law. Delaware law would permit holders of Class A common stock to vote, with one vote per share, on a matter if we were to: • change the par value of the common stock; or • amend our certificate of incorporation to alter the powers, preferences, or special rights of the common stock as a whole in a way that would adversely affect the holders of our Class A common stock. In addition, Delaware law would permit holders of Class A common stock to vote separately, as a single class, if an amendment of our certificate of incorporation would adversely affect them by altering the powers, preferences, or special rights of the Class A common stock, but not the Class B common stock or Class C common stock. As a result, in these limited instances, the holders of a majority of the Class A common stock could defeat any amendment to our certificate of incorporation. For example, if a proposed amendment of our certificate of incorporation provided for the Class A common stock to rank junior to the Class B common stock and Class C common stock with respect to (i) any dividend or distribution, (ii) the distribution of proceeds were we to be acquired, or (iii) any other right, Delaware law would require the vote of the Class A common stock, with each share of Class A common stock entitled to one vote per share. In this instance, the holders of a majority of Class A common stock could defeat that amendment to our certificate of incorporation. Moreover, if an amendment to our certificate of incorporation would alter the powers, preferences, or special rights of the Class A common stock and either the Class B common Stock or the Class C common stock in a way that would affect them adversely compared to the unaffected class, Delaware law would permit the holders of Class A common stock to vote with the other adversely affected class of common stock together as a single class. For example, if a proposed amendment to our certificate of incorporation provided for the Class A common stock and Class B common stock to rank junior to the Class C common stock with respect to (i) any dividend or distribution, (ii) the distribution of proceeds were we to be acquired, or (iii) any other right, Delaware law would require the vote of the Class A common stock and Class B common stock voting together as a single class, with each share of Class A common stock and Class B common stock entitled to one vote per share. In this instance, the holders of a majority of the Class A common stock and Class B common stock, voting together as a single class, could defeat that amendment to our certificate of incorporation. --- So, yes, the class is called "non-voting" but, as I point out, they still do have powers to vote. Just very limited ones. However, I am perfectly willing to admit that you do have a point that this is literally as de minimis as it gets. This is distinctly unusual. But it is still not zero voting power - just literally as close as delaware law allows.

libertymcateer 10y ago

I got NY and DE switched - NY = shareholder, DE = stockholder. I actually have that on a sticky on my desk. Sadly.