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He could also himself shares with super-voting power, like what Facebook and Google have done.

DennisP 5y ago
Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.
- mardifoufs 5y ago
  Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise. Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders. Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership. Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated. Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
- dsizzle 5y ago
  Yes, it's possible: Google, for instance, did it not only after taking outside investment, but after it went public (in 2014, 10 years after it went public) https://www.investopedia.com/ask/answers/052615/whats-difference-between-googles-goog-and-googl-stock-tickers.asp https://www.investopedia.com/ask/answers/052615/whats-differ...
quickthrowman 5y ago
Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders. https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b1bc https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...
- dannyw 5y ago
  Plenty of IPOs this year had dual class shares (~20% I believe). Founders are often billionaires; money is now measured in log terms, but control is a boolean. If they already have control, they'll want to keep that control. Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
- dsizzle 5y ago
  The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp https://www.investopedia.com/terms/s/spphenomenon.asp The person controlling the company potentially has a much greater and longer lasting influence on the stock price! Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.

Is it possible to do that after taking outside investment? I always assumed share classes like that had to be set up at the beginning.

mardifoufs 5y ago
Almost everything is possible you manage to get the other shareholders to agree. That might happen when some early investors sometimes want the founder to have more control especially before going public. The theory is that you'd rather have a founder you invested on in the first place steering the company than let your generic wallstreet shareholder without a vision(tm) take over a unicorn still full of promise. Sometimes the bet pays off, very very well. Take for example Musk. You can say whatever about him, but it's extremely clear he has a vision, and does pretty much anything to get there. I'm not sure tesla or spacex would've survived 2018 with someone else at the helm or if a shareholder revolt happened. Just by that metric he is already worth dozens of billions to the rest of the shareholders. Zuck is also a good example of investors trading off votes for a more wall st. independant, steadier long term eadership. Now keep in mind those are exceptions. Having supervoting shares orbmultiple classes of shareholders is very often not a good thing and usually leads to less value being generated. Accountability to shareholders is usually good and very important to ensure sane corporate governance. Which is why CEOs and founders absolutely love having ever less powerful shareholders and we end up in situations like now where even the crappiest IPO has absurdly overgeared supervoting classes. Who doesn't want to buy in a deeply in debt, cash burning ipo with very questionable growth who's founder has a perpetual 80% of the votes?
dsizzle 5y ago
Yes, it's possible: Google, for instance, did it not only after taking outside investment, but after it went public (in 2014, 10 years after it went public) https://www.investopedia.com/ask/answers/052615/whats-difference-between-googles-goog-and-googl-stock-tickers.asp https://www.investopedia.com/ask/answers/052615/whats-differ...

quickthrowman 5y ago

Companies don’t do this anymore because S&P and other index creators will refuse to add your company to their indexes if you have multiple share classes. It’s much better to be part of an index than to retain founder control, for shareholders. https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b1bc https://www.ft.com/content/993e4c11-8729-3168-a280-69e1d400b...

dannyw 5y ago
Plenty of IPOs this year had dual class shares (~20% I believe). Founders are often billionaires; money is now measured in log terms, but control is a boolean. If they already have control, they'll want to keep that control. Investors (VC, etc) have made 20x or more on their investment already and no one is going to go on a fight with successful founders, for a variety of reasons but primarily, they don't care how a company performs in the long run because their fund has already sold their stake and closed already.
dsizzle 5y ago
The price boost from being added to the S&P is temporary and small (~5%) https://www.investopedia.com/terms/s/spphenomenon.asp https://www.investopedia.com/terms/s/spphenomenon.asp The person controlling the company potentially has a much greater and longer lasting influence on the stock price! Epic isn't going to be part of the S&P when it's private anyway, so obviously that's not a top concern for Sweeney.