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> We have 3 classes of stock: Class A shares which have 1 vote, class B shares, which have 20 votes, and class C shares which have 20 votes. All classes vote al

> We have 3 classes of stock: Class A shares which have 1 vote, class B shares, which have 20 votes, and class C shares which have 20 votes. All classes vote alongside each other. I wouldn’t consider being an investor in this company unless class B or C shares are publicly traded. Just look at the underperformance of GOOGL, SNAP, and SQ for reasons why not to be an investor here.

nindalf 7y ago
> underperformance of GOOGL This stock went from $54 in Aug 2004 to $1196 today. Just for me to understand, is that "underperformance"? Is your claim that other stocks that have a traditional voting structure have outperformed GOOGL over the same time period or that GOOGL itself could have achieved much higher highs, say 30x instead of a mere 22x? Either way, those are tall claims and it's on you to prove it.
- skinnymuch 7y ago
  Your point is completely correct. A tiny bit for the full possible return being greater. Google IPOed at $85. And closed at $100. Either way, the initial price is between $42.50 and $50, accounting for the stock split. It’s between 24-28x based on yesterday’s price (before 2.5% drop today).
- webninja 7y ago
  There was a time when GOOGL was $900 and AMZN was $900. Look at where their share prices are now. $1182 and $1791. One of them underperformed the other.
  - webninja 7y ago
    To elaborate further the justification for this discrepancy for anyone who likes reading: Stocks are ultimately worth a function of 4 things: 1) The value of their future dividends, 2) The value of their future stock buybacks, 3) The value of remaining book assets at company liquidation/bankruptcy, or 4) the value per share everyone will receive if the company is bought out. People can invest for non-monetary reasons: for example wanting to invest in Tesla because they just want electric cars to be a thing or investing in Google because they just love certain aspects of the company. However, at late-stage investing, investments are based on fiduciary incentives from these 4 returns of capital. Absent those 4 methods of returning capital, stock investing is a pyramid scheme. Amazon shareholders can eventually collude together to vote for more returns of capital if they ever stop believing in Jeff Bezos’s above average performance in returning increasingly higher amounts of free cash flow. This is about as likely as it is for Buffet’s BRK.A/BRK.B (highly unlikely due to his high profile but not impossible if everything were to go south). A buyout of Alphabet is unlikely at this point because only 3 companies have a higher market cap now. Tech companies don’t have much book value to liquidate. They can potentially choose to not to ever give a dividend and they can keep doing share buybacks in joke quantities —- and pension funds can’t potentially vote to change that. This is my theory for these stock performance discrepancies and I’d be happy to hear others thoughts on this.
pmart123 7y ago
GOOGL has voting rights versus GOOG. There hasn't been a large performance difference though. IAC vs. MTCH, FB, Nike, Berkshire, and Regeneron all have done well though long-term with dual share classes as contra examples. Founder led companies typically out-perform the market. In WeWork's case though, we've seen huge governance red flags already though, so I am not saying voting rights don't matter. If the management is aligned with the long-term vision (not selling $700M before the IPO), they typically matter less.
- webninja 7y ago
  Sergey Brin and Larry Page together own 14% of Alphabet’s shares but own 56% of Alphabet’s voting rights because the shares they own are mostly non-public preferred shares. Since they own more than 51% of the voting rights, GOOGL shares don’t carry a meaningful premium over GOOG. Today, the premium is only between $2 and $3.
jermaustin1 7y ago
Unfavorable opinion alert! Lets say they were publicly traded, and not held for institutions, VCs, and fonders. Would you as a person, buying Class B shares ever buy enough that the 20 votes per share matter? Why does the number of votes to you matter, unless you sank a few hundred million into the company (at which point, you would be an institution or vc), your votes wouldn't matter with any of the classes.
- gtfratteus 7y ago
  Creating a share structure like this makes me worry that the founders will continue to have a controlling stake in the company, and new investors won't be able to exert any influence over the company. Companies run by ideologues like WeWork often do a lot of things that aren't necessarily in the best interest of their investors (like banning meat from their offices). If the public investors have no power to reign that in, you're completely at the mercy of the founder.
- dragandj 7y ago
  The reverse of that argument is "if my vote doesn't matter, why do they want to additionally shrink it by 20x"?
- goobynight 7y ago
  While the answer would be no for most, it helps to have VCs and institutions that have a buy-in price similar to yours, essentially advocating to protect everyone's investment.
skinnymuch 7y ago
Square was a $35B company 2 weeks ago before a disappointing earnings. Stock was up 9x from IPO less than 4 years ago. How is that disappointing? The stock tanked hard from the earnings so it’s a $26B company now with $60-62 stock price. Still much better than the $9 IPO price. Google is the 4th biggest company in the world. Don’t need to even go there. Snap growth was already stalling when they IPOed and then Facebook especially Instagram really went after them.

nindalf 7y ago

> underperformance of GOOGL This stock went from $54 in Aug 2004 to $1196 today. Just for me to understand, is that "underperformance"? Is your claim that other stocks that have a traditional voting structure have outperformed GOOGL over the same time period or that GOOGL itself could have achieved much higher highs, say 30x instead of a mere 22x? Either way, those are tall claims and it's on you to prove it.

skinnymuch 7y ago
Your point is completely correct. A tiny bit for the full possible return being greater. Google IPOed at $85. And closed at $100. Either way, the initial price is between $42.50 and $50, accounting for the stock split. It’s between 24-28x based on yesterday’s price (before 2.5% drop today).
webninja 7y ago
There was a time when GOOGL was $900 and AMZN was $900. Look at where their share prices are now. $1182 and $1791. One of them underperformed the other.
- webninja 7y ago
  To elaborate further the justification for this discrepancy for anyone who likes reading: Stocks are ultimately worth a function of 4 things: 1) The value of their future dividends, 2) The value of their future stock buybacks, 3) The value of remaining book assets at company liquidation/bankruptcy, or 4) the value per share everyone will receive if the company is bought out. People can invest for non-monetary reasons: for example wanting to invest in Tesla because they just want electric cars to be a thing or investing in Google because they just love certain aspects of the company. However, at late-stage investing, investments are based on fiduciary incentives from these 4 returns of capital. Absent those 4 methods of returning capital, stock investing is a pyramid scheme. Amazon shareholders can eventually collude together to vote for more returns of capital if they ever stop believing in Jeff Bezos’s above average performance in returning increasingly higher amounts of free cash flow. This is about as likely as it is for Buffet’s BRK.A/BRK.B (highly unlikely due to his high profile but not impossible if everything were to go south). A buyout of Alphabet is unlikely at this point because only 3 companies have a higher market cap now. Tech companies don’t have much book value to liquidate. They can potentially choose to not to ever give a dividend and they can keep doing share buybacks in joke quantities —- and pension funds can’t potentially vote to change that. This is my theory for these stock performance discrepancies and I’d be happy to hear others thoughts on this.

pmart123 7y ago

GOOGL has voting rights versus GOOG. There hasn't been a large performance difference though. IAC vs. MTCH, FB, Nike, Berkshire, and Regeneron all have done well though long-term with dual share classes as contra examples. Founder led companies typically out-perform the market. In WeWork's case though, we've seen huge governance red flags already though, so I am not saying voting rights don't matter. If the management is aligned with the long-term vision (not selling $700M before the IPO), they typically matter less.

webninja 7y ago
Sergey Brin and Larry Page together own 14% of Alphabet’s shares but own 56% of Alphabet’s voting rights because the shares they own are mostly non-public preferred shares. Since they own more than 51% of the voting rights, GOOGL shares don’t carry a meaningful premium over GOOG. Today, the premium is only between $2 and $3.

jermaustin1 7y ago

Unfavorable opinion alert! Lets say they were publicly traded, and not held for institutions, VCs, and fonders. Would you as a person, buying Class B shares ever buy enough that the 20 votes per share matter? Why does the number of votes to you matter, unless you sank a few hundred million into the company (at which point, you would be an institution or vc), your votes wouldn't matter with any of the classes.

gtfratteus 7y ago
Creating a share structure like this makes me worry that the founders will continue to have a controlling stake in the company, and new investors won't be able to exert any influence over the company. Companies run by ideologues like WeWork often do a lot of things that aren't necessarily in the best interest of their investors (like banning meat from their offices). If the public investors have no power to reign that in, you're completely at the mercy of the founder.
dragandj 7y ago
The reverse of that argument is "if my vote doesn't matter, why do they want to additionally shrink it by 20x"?
goobynight 7y ago
While the answer would be no for most, it helps to have VCs and institutions that have a buy-in price similar to yours, essentially advocating to protect everyone's investment.

skinnymuch 7y ago

Square was a $35B company 2 weeks ago before a disappointing earnings. Stock was up 9x from IPO less than 4 years ago. How is that disappointing? The stock tanked hard from the earnings so it’s a $26B company now with $60-62 stock price. Still much better than the $9 IPO price. Google is the 4th biggest company in the world. Don’t need to even go there. Snap growth was already stalling when they IPOed and then Facebook especially Instagram really went after them.