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> then the board should absolutely give him the boot in the next 24 months. Very funny, Snapchat has two classes of stock and he owns enough of the kind that m

> then the board should absolutely give him the boot in the next 24 months. Very funny, Snapchat has two classes of stock and he owns enough of the kind that matters that no one can oust him. I looked through the S-1 when they were going public and decided owning the shares they were selling to the public was the equivalent of a "board observer" seat. You are free to watch him run his company, but it is still his company https://www.recode.net/2017/2/21/14670314/snap-ipo-stock-voting-structure https://www.recode.net/2017/2/21/14670314/snap-ipo-stock-vot...

sireat 8y ago
The sad thing is that it applies to many other companies these days, most notably Facebook, Google et al. Why do people buy common shares which give them no voting rights as a shareholder? Sure while company is minting money (or debt and marketshare) you can find a greater fool to offload your shares. However when things turn the Zynga way, what recourse do you have with these no vote shares? At least Bond holders and Preferred Shareholders have certain rights. PS Then there are the Chinese stocks such as BABA where you do not even own the assets of the main company but I digress..
- baby 8y ago
  You have rights if you own enough right? Also why are there two kind of shares?
  - philipov 8y ago
    Because the original investors don't want their shares to be diluted.
  - Latteland 8y ago
    Google stock is organized into different classes with different voting rights and amounts of shares (a few years ago a new class came out without voting shares but got dividends first, if I recall correctly), and the founders have control as long as they want it. At the time, I thought this was dangerous since the current king might be good (ie the founders) but what if the next king who has control was someone who has wants to control people through tyrannical means using their entire life histories (ie google tracking on everything).
- Animats 8y ago
  I think we're going to see less of that. A few companies with founder control through multiple classes of stock have screwed up badly. It's now a negative with investors. For many decades, the New York Stock Exchange refused to list stocks that had multiple classes of stock, except for a few companies such as Ford Motor that were grandfathered in. But they no longer have enough clout to make that stick. Google and Facebook got away with it because they were highly profitable before the IPO. Snap was not like that.[1] They went public while still losing money, and with way too high a valuation. It's been all downhill since the IPO. [1] https://www.forbes.com/sites/robertberger/2017/03/07/snapchat-ipo-dont-confuse-popular-with-profitable/#5bdba09f2b73 https://www.forbes.com/sites/robertberger/2017/03/07/snapcha...
  - bilbo0s 8y ago
    >Google and Facebook got away with it because they were highly profitable before the IPO. Snap was not like that... So basically, we'll see it with the companies that are profitable at the time of their ipo's, but we won't see it with the companies that are unprofitable, (and maybe even losing money), at the time of their ipo's. Sounds to me like the future Facebooks and Googles of the world will continue to set up structures like these. Before anyone jumps down my throat, I'm not complaining. I know, it's the founder's company. I get that. I'm free not to invest if I don't like the terms. I just wanted to point out that HN User "Animats'" conclusion that founders will choose this structure less and less is flawed. It really does seem to me that this structure is just going to be more and more of a reality in the future for any of the startups that are actually worth buying into. (ie - Any of the startups that actually make money.) In the end, the founders of the winning companies don't want their money or power diluted.
  - sseveran 8y ago
    The big change is that S&P is no longer going to consider adding companies with structures like this to the S&P 500. Existing companies got grandfathered in.
  - squaresmile 8y ago
    Aren't both Google and Facebook on NASDAQ and not NYSE? Anyway, I can't also find any reference to NYSE refusing to list dual class shares so I would be grateful if you can point me to some resources.
- dannyw 8y ago
  The indexing and exchange listing changes have meant that it’s less and less likely to see multi class shares now.
- Blackthorn 8y ago
  > Why do people buy common shares which give them no voting rights as a shareholder? Because you believe in the people who have the voting rights? Let's get real here: for those of us buying stock with voting rights, we don't really have voting rights. The proportion we have is so vanishingly small it's the same as not having voting rights in the first place.
  - asmithmd1 8y ago
    Exactly, Just like democracy is the same as a dictator
    - Blackthorn 8y ago
      Well, in an actual democracy you'd have one person being worth one vote. That certainly doesn't exist where I live (USA), and it doesn't exist with corporate voting shares either (where money = votes), so that analogy is pretty much bunk at the start.
      - grkvlt 8y ago
        I've heard various 'arguments' that the US is not a democracy, but not based on the fact that one person-one vote is untrue; what do you mean by this? Is it something to do with the electoral college system, or perhaps the large class of disenfranchised persons?
        opportune 8y ago
        Short answer: the US has two senators for each state, some states have much more population than others, so proportionally a vote in Wyoming counts "more" than a vote in California. This has direct effects in the legislative branch (the Senate) and indirect effects in presidential elections (electoral college) and thus also indirectly in the Supreme Court (nomination + approval).
        airstrike 8y ago
- bearmcbearsly 8y ago
  > Why do people buy common shares which give them no voting rights as a shareholder? Because they trust the founders to protect the long-term interests of the company more than activist investors trying to maximize short-term profit?
tigershark 8y ago
Exactly, I was going to write the same thing, although with a small, but perhaps quite important correction: “You are free to watch him ruin his company, but it is still his company”
- profalseidol 8y ago
  And ruin the lives of it's employees. Long live our most honorable Capital Feudal Lords!
  - hazz99 8y ago
    I think if they work at Snap then they can find work at other companies, I wouldn't say their lives are 'ruined'
    - profalseidol 8y ago
      Ok, not ruined. But denial in creative fulfillment. Imagine working so hard to finish your music record, only to be destroyed by illegitimate forces.
  - SmellyGeekBoy 8y ago
    We're talking about some of the highest paid people in the world here, with excellent job prospects should things go south. That's before we even get started on stock options and how many early employees of these startups become millionaires.
    - profalseidol 8y ago
      Sure they got good financial security, even if you are employed at some unknown third-world software company. You're prospects are still very good compared to a blue-colar. However, financial security is not the only thing you need in life to be happy.
sytelus 8y ago
This is general pattern and it’s a good thing. More often than not founder is much better bet to execute on vision and longer term success. However, recently it has been shown that investors still are able to excert good level of influence and control. The way this happens is via controlling the future flow of investment. If big investors gang up on not buying a stock or sell out en mass, the founders with dictatorial powers will have to bent. Uber is example where founder got ousted despite of his retaining voting majority.

sireat 8y ago

The sad thing is that it applies to many other companies these days, most notably Facebook, Google et al. Why do people buy common shares which give them no voting rights as a shareholder? Sure while company is minting money (or debt and marketshare) you can find a greater fool to offload your shares. However when things turn the Zynga way, what recourse do you have with these no vote shares? At least Bond holders and Preferred Shareholders have certain rights. PS Then there are the Chinese stocks such as BABA where you do not even own the assets of the main company but I digress..

baby 8y ago
You have rights if you own enough right? Also why are there two kind of shares?
- philipov 8y ago
  Because the original investors don't want their shares to be diluted.
- Latteland 8y ago
  Google stock is organized into different classes with different voting rights and amounts of shares (a few years ago a new class came out without voting shares but got dividends first, if I recall correctly), and the founders have control as long as they want it. At the time, I thought this was dangerous since the current king might be good (ie the founders) but what if the next king who has control was someone who has wants to control people through tyrannical means using their entire life histories (ie google tracking on everything).
Animats 8y ago
I think we're going to see less of that. A few companies with founder control through multiple classes of stock have screwed up badly. It's now a negative with investors. For many decades, the New York Stock Exchange refused to list stocks that had multiple classes of stock, except for a few companies such as Ford Motor that were grandfathered in. But they no longer have enough clout to make that stick. Google and Facebook got away with it because they were highly profitable before the IPO. Snap was not like that.[1] They went public while still losing money, and with way too high a valuation. It's been all downhill since the IPO. [1] https://www.forbes.com/sites/robertberger/2017/03/07/snapchat-ipo-dont-confuse-popular-with-profitable/#5bdba09f2b73 https://www.forbes.com/sites/robertberger/2017/03/07/snapcha...
- bilbo0s 8y ago
  >Google and Facebook got away with it because they were highly profitable before the IPO. Snap was not like that... So basically, we'll see it with the companies that are profitable at the time of their ipo's, but we won't see it with the companies that are unprofitable, (and maybe even losing money), at the time of their ipo's. Sounds to me like the future Facebooks and Googles of the world will continue to set up structures like these. Before anyone jumps down my throat, I'm not complaining. I know, it's the founder's company. I get that. I'm free not to invest if I don't like the terms. I just wanted to point out that HN User "Animats'" conclusion that founders will choose this structure less and less is flawed. It really does seem to me that this structure is just going to be more and more of a reality in the future for any of the startups that are actually worth buying into. (ie - Any of the startups that actually make money.) In the end, the founders of the winning companies don't want their money or power diluted.
- sseveran 8y ago
  The big change is that S&P is no longer going to consider adding companies with structures like this to the S&P 500. Existing companies got grandfathered in.
- squaresmile 8y ago
  Aren't both Google and Facebook on NASDAQ and not NYSE? Anyway, I can't also find any reference to NYSE refusing to list dual class shares so I would be grateful if you can point me to some resources.
dannyw 8y ago
The indexing and exchange listing changes have meant that it’s less and less likely to see multi class shares now.
Blackthorn 8y ago
> Why do people buy common shares which give them no voting rights as a shareholder? Because you believe in the people who have the voting rights? Let's get real here: for those of us buying stock with voting rights, we don't really have voting rights. The proportion we have is so vanishingly small it's the same as not having voting rights in the first place.
- asmithmd1 8y ago
  Exactly, Just like democracy is the same as a dictator
  - Blackthorn 8y ago
    Well, in an actual democracy you'd have one person being worth one vote. That certainly doesn't exist where I live (USA), and it doesn't exist with corporate voting shares either (where money = votes), so that analogy is pretty much bunk at the start.
    - grkvlt 8y ago
      I've heard various 'arguments' that the US is not a democracy, but not based on the fact that one person-one vote is untrue; what do you mean by this? Is it something to do with the electoral college system, or perhaps the large class of disenfranchised persons?
      - opportune 8y ago
        Short answer: the US has two senators for each state, some states have much more population than others, so proportionally a vote in Wyoming counts "more" than a vote in California. This has direct effects in the legislative branch (the Senate) and indirect effects in presidential elections (electoral college) and thus also indirectly in the Supreme Court (nomination + approval).
        airstrike 8y ago
bearmcbearsly 8y ago
> Why do people buy common shares which give them no voting rights as a shareholder? Because they trust the founders to protect the long-term interests of the company more than activist investors trying to maximize short-term profit?

tigershark 8y ago

Exactly, I was going to write the same thing, although with a small, but perhaps quite important correction: “You are free to watch him ruin his company, but it is still his company”

profalseidol 8y ago
And ruin the lives of it's employees. Long live our most honorable Capital Feudal Lords!
- hazz99 8y ago
  I think if they work at Snap then they can find work at other companies, I wouldn't say their lives are 'ruined'
  - profalseidol 8y ago
    Ok, not ruined. But denial in creative fulfillment. Imagine working so hard to finish your music record, only to be destroyed by illegitimate forces.
- SmellyGeekBoy 8y ago
  We're talking about some of the highest paid people in the world here, with excellent job prospects should things go south. That's before we even get started on stock options and how many early employees of these startups become millionaires.
  - profalseidol 8y ago
    Sure they got good financial security, even if you are employed at some unknown third-world software company. You're prospects are still very good compared to a blue-colar. However, financial security is not the only thing you need in life to be happy.

sytelus 8y ago

This is general pattern and it’s a good thing. More often than not founder is much better bet to execute on vision and longer term success. However, recently it has been shown that investors still are able to excert good level of influence and control. The way this happens is via controlling the future flow of investment. If big investors gang up on not buying a stock or sell out en mass, the founders with dictatorial powers will have to bent. Uber is example where founder got ousted despite of his retaining voting majority.