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To expand on the sibling comment, Facebook has two classes of shares. Class A shares have one vote and are the shares that are traded on stock exchanges. Clas

To expand on the sibling comment, Facebook has two classes of shares. Class A shares have one vote and are the shares that are traded on stock exchanges. Class B shares get 10 votes each and are held by Zuckerberg and friends. Zuckerberg has enough Class B shares that he really can't be outvoted by other investors.

matheusmoreira 5y ago
> Facebook has two classes of shares I had no idea companies could legally create vastly unequal schemes like that. How do people even find out about things like this? Is this information available somewhere? Impossible to make good investment decisions without this sort of knowledge.
- jsmith99 5y ago
  The London Stock Exchange doesn't allow such dual class share structures for exactly this reason. That's partly why it has become so unpopular with tech companies. They are considering changing the rule but many of London's brokers and institutional investors strongly oppose it.
  - 1vuio0pswjnm7 5y ago
    Tne NYSE used to restrict it. They relaxed the restrictions in the 1980's. Google was the company that started the trend in 2005. (Note they were sued by their shareholders and settled.) The percentage of companies using this type of structure was like 1% in 2005. By 2017 it was 22%. It is probably even higher today. It is used outside of Silicon Valley, too, but those non-tech companies have real products and services that produce revenue. They don't bait people with "free", spy on them and sell ads. If I'm not mistaken there are some index funds that will exclude companies with dual class shares. This is why "tech" companies can pursue outlandish projects that produce no revenue. Shareholders effectively have insufficient rights to question such decisions and hold the founders to account.
- ageek123 5y ago
  This is always disclosed when a company files to go public. It's not secret. It's actually good for long term shareholder value in most cases.
  - Thorrez 5y ago
    On the other hand, the S&P500 will be excluding future companies that do this, so some powerful people in the finance community must think it's bad. https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after-voting-rights-debate.html https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after...
    - ReptileMan 5y ago
      Some powerful people in finance think it is bad for THEM. Not bad per se.
  - roenxi 5y ago
    Weeeeeell... it isn't a secret, that is true. And technically speaking there is no problem here. But it is easy to imagine that this happened to be able to hoodwink someone with the "Zuckerburg only controls 10% of the shares!" style soundbites without being forced to point out that means control of the company. Realistically this practice should probably be banned on the basis that Facebook could achieve a similar outcome with something like one class of shares and selling bonds to the public, or something. Allowing a "share" to break the one-share-one-vote principle is unnecessarily confusing and misleading. Lawyers shouldn't be redefining words. These words are meant to mean something. Although this is unlikely to be a new practice, I think Berkshire had different classes of share.
    - easton 5y ago
      Berkshire has different classes of share so that people could invest at something lower than $250k+ a share (Buffett didn't want to split the stock).
    - wcunning 5y ago
      Ford famously pioneered it over a hundred years ago to keep control in the Ford family, which is still true today, though the family is now spread out enough that they don’t necessarily vote as a block on all matters.
- sandworm101 5y ago
  It adds a level of stability. Some institutional investors don't want shareholders to have power over a company because that opens the doors to things like hostile takeovers. Having all the voting power vested in the core "founders" means the company won't ever be subject to change from outside. So, if you like things as they are, you can rest assured that things likely will never change. Only a long term investor, someone willing to retain shares during a corporate crisis, really cares about actually voting out one board for another. A short term investor wants to ride on the coattails but will jump rather than attempt to change where those coattails are headed.
  - matheusmoreira 5y ago
    What is the point of publicly trading a company if the public can never actually gain control of it? That would make it solely about speculation.
    - sandworm101 5y ago
      >> it's just about speculation. As opposed to all the other reasons people buy publicly-traded shares?
      - matheusmoreira 5y ago
        I thought the power to affect corporate decision making was an important part of investing. Apparently not.
        sandworm101 5y ago
        That power is still there. By selling their non-voting shares investors lower their price, which has knock-on impacts on the corporation. What is lost is the power to directly make corporate decisions.
        matheusmoreira 5y ago
        > What is lost is the power to directly make corporate decisions. That's what I meant.
- motoxpro 5y ago
  Not just Facebook that is structured like this. And as someone said, it's very public. You must be making investment decisions without looking at any corporate documents.
  - matheusmoreira 5y ago
    > You must be making investment decisions without looking at any corporate documents. Well, I've never actually invested in any company before. Mostly because of stuff like this. I always assumed there's some insider information I'm missing out on.
    - yuliyp 5y ago
      As a start, every publicly traded company in the US publishes an annual and quarterly report that is available to anyone for free. Those generally have quite a bit of information about what's going on with the company, its structure, financial situation, management, etc. Searching for `$COMPANY_NAME annual report` is a good start
      - matheusmoreira 5y ago
        Thanks.
- 1vuio0pswjnm7 5y ago
  Someone asked the other day about who owns the Facebook "super-voting" shares, besides Zuckerberg. These shares are not traded on any public exchange so the ability to track them is limited. In the Facebook registration statement from 2012, one can get an idea of who owns these class B shares. https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/0001193125-12-034517.txt#toc287954_15 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...
- lakecresva 5y ago
  This information is required to be in the articles of incorporation which are filed with the secretary of state. For public companies you can usually just google e.g. "Apple articles of incorporation" and the sec's copy will show up.

matheusmoreira 5y ago

> Facebook has two classes of shares I had no idea companies could legally create vastly unequal schemes like that. How do people even find out about things like this? Is this information available somewhere? Impossible to make good investment decisions without this sort of knowledge.

jsmith99 5y ago
The London Stock Exchange doesn't allow such dual class share structures for exactly this reason. That's partly why it has become so unpopular with tech companies. They are considering changing the rule but many of London's brokers and institutional investors strongly oppose it.
- 1vuio0pswjnm7 5y ago
  Tne NYSE used to restrict it. They relaxed the restrictions in the 1980's. Google was the company that started the trend in 2005. (Note they were sued by their shareholders and settled.) The percentage of companies using this type of structure was like 1% in 2005. By 2017 it was 22%. It is probably even higher today. It is used outside of Silicon Valley, too, but those non-tech companies have real products and services that produce revenue. They don't bait people with "free", spy on them and sell ads. If I'm not mistaken there are some index funds that will exclude companies with dual class shares. This is why "tech" companies can pursue outlandish projects that produce no revenue. Shareholders effectively have insufficient rights to question such decisions and hold the founders to account.
ageek123 5y ago
This is always disclosed when a company files to go public. It's not secret. It's actually good for long term shareholder value in most cases.
- Thorrez 5y ago
  On the other hand, the S&P500 will be excluding future companies that do this, so some powerful people in the finance community must think it's bad. https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after-voting-rights-debate.html https://www.cnbc.com/2017/08/01/sp-500-to-exclude-snap-after...
  - ReptileMan 5y ago
    Some powerful people in finance think it is bad for THEM. Not bad per se.
- roenxi 5y ago
  Weeeeeell... it isn't a secret, that is true. And technically speaking there is no problem here. But it is easy to imagine that this happened to be able to hoodwink someone with the "Zuckerburg only controls 10% of the shares!" style soundbites without being forced to point out that means control of the company. Realistically this practice should probably be banned on the basis that Facebook could achieve a similar outcome with something like one class of shares and selling bonds to the public, or something. Allowing a "share" to break the one-share-one-vote principle is unnecessarily confusing and misleading. Lawyers shouldn't be redefining words. These words are meant to mean something. Although this is unlikely to be a new practice, I think Berkshire had different classes of share.
  - easton 5y ago
    Berkshire has different classes of share so that people could invest at something lower than $250k+ a share (Buffett didn't want to split the stock).
  - wcunning 5y ago
    Ford famously pioneered it over a hundred years ago to keep control in the Ford family, which is still true today, though the family is now spread out enough that they don’t necessarily vote as a block on all matters.
sandworm101 5y ago
It adds a level of stability. Some institutional investors don't want shareholders to have power over a company because that opens the doors to things like hostile takeovers. Having all the voting power vested in the core "founders" means the company won't ever be subject to change from outside. So, if you like things as they are, you can rest assured that things likely will never change. Only a long term investor, someone willing to retain shares during a corporate crisis, really cares about actually voting out one board for another. A short term investor wants to ride on the coattails but will jump rather than attempt to change where those coattails are headed.
- matheusmoreira 5y ago
  What is the point of publicly trading a company if the public can never actually gain control of it? That would make it solely about speculation.
  - sandworm101 5y ago
    >> it's just about speculation. As opposed to all the other reasons people buy publicly-traded shares?
    - matheusmoreira 5y ago
      I thought the power to affect corporate decision making was an important part of investing. Apparently not.
      - sandworm101 5y ago
        That power is still there. By selling their non-voting shares investors lower their price, which has knock-on impacts on the corporation. What is lost is the power to directly make corporate decisions.
        matheusmoreira 5y ago
        > What is lost is the power to directly make corporate decisions. That's what I meant.
motoxpro 5y ago
Not just Facebook that is structured like this. And as someone said, it's very public. You must be making investment decisions without looking at any corporate documents.
- matheusmoreira 5y ago
  > You must be making investment decisions without looking at any corporate documents. Well, I've never actually invested in any company before. Mostly because of stuff like this. I always assumed there's some insider information I'm missing out on.
  - yuliyp 5y ago
    As a start, every publicly traded company in the US publishes an annual and quarterly report that is available to anyone for free. Those generally have quite a bit of information about what's going on with the company, its structure, financial situation, management, etc. Searching for `$COMPANY_NAME annual report` is a good start
    - matheusmoreira 5y ago
      Thanks.
1vuio0pswjnm7 5y ago
Someone asked the other day about who owns the Facebook "super-voting" shares, besides Zuckerberg. These shares are not traded on any public exchange so the ability to track them is limited. In the Facebook registration statement from 2012, one can get an idea of who owns these class B shares. https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/0001193125-12-034517.txt#toc287954_15 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...
lakecresva 5y ago
This information is required to be in the articles of incorporation which are filed with the secretary of state. For public companies you can usually just google e.g. "Apple articles of incorporation" and the sec's copy will show up.