4 ms·

For the same reason 50% of the US didn't vote in the last election. Or employees don't demand to view board decks. Most investors are buying as a way to make m

For the same reason 50% of the US didn't vote in the last election. Or employees don't demand to view board decks. Most investors are buying as a way to make money off of continued success. They don't want to control the business or make decisions, and even if they did, they don't want to invest enough to make a dent in the normal 1-share-1-vote sort of model. They're looking the company and hooking their accounts to its success. In the public markets, most investors aren't in it for the control, they're in it for the returns.

slezakattack 10y ago
I think you have an interesting point but I disagree with your analogy of a presidential election. The motivations for voting in a presidential election are not always financial (even though future policies could very well determine your own financial outlook..). I think you're right about investors are in it for the returns but having control can help steer your returns. If everybody thinks the CEO is not increasing shareholder value, you vote to remove said CEO. This is not always positive either as many investors want quick returns and not always have patience for visionaries..
- trjordan 10y ago
  I guess my point was more that at some scale, it feels worthless to vote at all. If I disagree with Snap's CEO, my $500 of stock feels about like my vote in the presidential election. I doubt my input changes the course of anything. There's a good reason to exert control in both cases, but for many, it feels futile to do so.
bduerst 10y ago
Why not just invest in corporate bonds then? At least then you're safer from bankruptcies.
- zardo 10y ago
  Because you're also safe from huge success.
- jasode 10y ago
  Corporate bonds are not a slam dunk win over investing in dual class shares of an IPO. What kind of corporate bonds specifically? Is it Super safe AAA rated?[1] Or high-yield (aka "junk bonds")?[2] If an investor wants big returns like he's hoping for Snap's IPO, buying safe AAA bonds isn't going to match that. E.g. Microsoft's 10-year bond only pays 3.34%.[3] That low interest rate barely above Treasury bills is the "price you pay" for safety. If you want to take more risk with a "BB-" corporate bond from Frontier Communications[4], that will pay 11%. That still won't match the potential upside of high flying stocks and the investor has to factor in Frontier's increased potential for defaulting on that debt. (Frontier wouldn't have to pay 11% if all lenders were confident the company would pay it back.) It's not just the bankruptcies to worry about; lots of corporations default on their debts.[5][6] It's perfectly rational for some investors to calculate a risk-vs-reward and conclude that investing in shares with reduced voting power is better putting money into low-grade corporate bonds. [1] http://www.marketwatch.com/story/exxon-mobils-downgrade-leaves-just-two-aaa-rated-companies-in-the-us-2016-04-26 http://www.marketwatch.com/story/exxon-mobils-downgrade-leav... [2] https://en.wikipedia.org/wiki/High-yield_debt https://en.wikipedia.org/wiki/High-yield_debt [3] https://www.ft.com/content/7d0a5618-e70d-11e6-967b-c88452263daf https://www.ft.com/content/7d0a5618-e70d-11e6-967b-c88452263... [4] http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=ftr http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=... [5] http://www.zerohedge.com/news/2016-07-14/global-corporate-defaults-just-hit-100-pace-surpass-financial-crisis-record http://www.zerohedge.com/news/2016-07-14/global-corporate-de... [6] http://www.marketwatch.com/story/company-defaults-headed-for-largest-cyclical-rise-since-recession-2016-04-11 http://www.marketwatch.com/story/company-defaults-headed-for...
- prostoalex 10y ago
  Well, that's where the institutional smart money is, buying up and depressing yields on high quality corporate debt. Bond market pricing also benefits large investors. A small guy buying 20-30 bonds will pay higher markup, higher commission and be quoted higher price than a large player with an 8-digit buy order. In a stock market (outside the dark pools) two players will get quoted roughly the same market price. The larger guy is likely to be at a disadvantage, as exposing a large buy order might lead to supply tightening.

slezakattack 10y ago

I think you have an interesting point but I disagree with your analogy of a presidential election. The motivations for voting in a presidential election are not always financial (even though future policies could very well determine your own financial outlook..). I think you're right about investors are in it for the returns but having control can help steer your returns. If everybody thinks the CEO is not increasing shareholder value, you vote to remove said CEO. This is not always positive either as many investors want quick returns and not always have patience for visionaries..

trjordan 10y ago
I guess my point was more that at some scale, it feels worthless to vote at all. If I disagree with Snap's CEO, my $500 of stock feels about like my vote in the presidential election. I doubt my input changes the course of anything. There's a good reason to exert control in both cases, but for many, it feels futile to do so.

bduerst 10y ago

Why not just invest in corporate bonds then? At least then you're safer from bankruptcies.

zardo 10y ago
Because you're also safe from huge success.
jasode 10y ago
Corporate bonds are not a slam dunk win over investing in dual class shares of an IPO. What kind of corporate bonds specifically? Is it Super safe AAA rated?[1] Or high-yield (aka "junk bonds")?[2] If an investor wants big returns like he's hoping for Snap's IPO, buying safe AAA bonds isn't going to match that. E.g. Microsoft's 10-year bond only pays 3.34%.[3] That low interest rate barely above Treasury bills is the "price you pay" for safety. If you want to take more risk with a "BB-" corporate bond from Frontier Communications[4], that will pay 11%. That still won't match the potential upside of high flying stocks and the investor has to factor in Frontier's increased potential for defaulting on that debt. (Frontier wouldn't have to pay 11% if all lenders were confident the company would pay it back.) It's not just the bankruptcies to worry about; lots of corporations default on their debts.[5][6] It's perfectly rational for some investors to calculate a risk-vs-reward and conclude that investing in shares with reduced voting power is better putting money into low-grade corporate bonds. [1] http://www.marketwatch.com/story/exxon-mobils-downgrade-leaves-just-two-aaa-rated-companies-in-the-us-2016-04-26 http://www.marketwatch.com/story/exxon-mobils-downgrade-leav... [2] https://en.wikipedia.org/wiki/High-yield_debt https://en.wikipedia.org/wiki/High-yield_debt [3] https://www.ft.com/content/7d0a5618-e70d-11e6-967b-c88452263daf https://www.ft.com/content/7d0a5618-e70d-11e6-967b-c88452263... [4] http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=ftr http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=... [5] http://www.zerohedge.com/news/2016-07-14/global-corporate-defaults-just-hit-100-pace-surpass-financial-crisis-record http://www.zerohedge.com/news/2016-07-14/global-corporate-de... [6] http://www.marketwatch.com/story/company-defaults-headed-for-largest-cyclical-rise-since-recession-2016-04-11 http://www.marketwatch.com/story/company-defaults-headed-for...
prostoalex 10y ago
Well, that's where the institutional smart money is, buying up and depressing yields on high quality corporate debt. Bond market pricing also benefits large investors. A small guy buying 20-30 bonds will pay higher markup, higher commission and be quoted higher price than a large player with an 8-digit buy order. In a stock market (outside the dark pools) two players will get quoted roughly the same market price. The larger guy is likely to be at a disadvantage, as exposing a large buy order might lead to supply tightening.