4 ms·

Are super shares like Zuckerberg's and Musk a new thing? Genuinely curious if they're a recent invention or something that's quietly happened for a while becaus

by rtkwe 3mo ago

Are super shares like Zuckerberg's and Musk a new thing? Genuinely curious if they're a recent invention or something that's quietly happened for a while because it seems like a large inversion of the deal of going public, lose some control of the company in exchange for a large amount of cash but these nonvoting/supervoting share splits seem to completely upend what I understood to be part of the deal for access to the stock market.

nolta 3mo ago
https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares
- lapcat 3mo ago
  > Kreuger's financial empire has been described by one biographer as a Ponzi scheme... Another biographer called Kreuger a "genius and swindler", and John Kenneth Galbraith wrote that he was the "Leonardo of larcenists".
skybrian 3mo ago
No. Google has them too.
- Arainach 3mo ago
  That's absolutely still "recent" when discussing corporate governance.
- rtkwe 3mo ago
  Google is also pretty new in the terms I was talking about only slightly older than Facebook. I mean going back to the 80s/90s or earlier, pre current FAANG at least.
georgeecollins 3mo ago
Ford has them. What it has meant for Ford-- and will probably mean for Facebook-- is that Zuck's heirs will control the company, for better or for worse. The common justification for this is that for a media company (NYT) you want a person or family to take responsibility for the editorial content, not a pure profit seeker. Facebook has it both ways and typically denies it has editorial control. IMO, the flaw of markets is that they are short sighted. Sometimes this allows states to outmaneuver them with a longer view. Current exhibit A: China. Historically state intervention has been worse in the long run. But who knows. If we went into a depression a lot of people may think state intervention is a better system, as many admired the USSR during the Great Depression.
- orionsbelt 3mo ago
  Zuckerberg’s high vote shares convert to regular shares after he leaves or dies. His heirs will not continue to have super votes.
  - deleted 3mo ago
    [deleted]
  - shimman 3mo ago
    Don't worry, he will try to change the law before he passes this mortal coil. This is a person that has open disdain for the law and thinks he should be emperor of humanity.
    - sroussey 3mo ago
      You mean bylaw not law. No law says anything about super voting shares not surviving death.
- kmeisthax 3mo ago
  The USSR's main problem was not that it was socialist or communist, but that it was Russian. Russia is run by people who are adept at coopting revolutionary movements into a corrupt, authoritarian core. When left-wing libertarians say "true Socialism has never been tried", this is (along with China) what they are referring to. The theoretical arguments against socialism (or, more specifically, centrally planned state production) given by Hayek is that pricing is information and markets are computers on that information, ergo changing the information gives you a bad result. This certainly applied to the kinds of production the Soviet Union loved to engage in, but there's no particular reason why it can't apply to capitalist enterprise as well. I mean, Facebook's headcount or market cap alone is larger than some actual nation-states' population or GDP. Just like how the USSR was nominally socialist but practically engaged in exactly the same state-controlled mode of production as feudalism, today's corporate entities are nominally capitalist but practically feudalist. The medieval historians in the room would probably balk at me using the word "feudalist" to describe either, so to be clear, what I mean is "an economic system in which the majority of profit goes to landowners / platform owners / the state / etc". In this economic mode, companies can warp markets to their whims in exactly the same way Congress can. Except, Congress is democratically controlled. Joint-stock corporations are inherently oligarchial in structure: control of the company is assigned based on how many shares you can afford to buy, so the company answers to the amount of money that has capitalized it, and not any other concern[0]. The "innovation" in Facebook's IPO was to go from internal oligarchy to internal autocracy - to install Mark Zuckerberg as God-Emperor of Facebook and largely depose the shareholder class that normally runs publicly-traded entities. You'd think markets would have priced in this risk, but Facebook IPO'd at the peak of its hype and was able to get away with this. The funny thing about Hayek's distributed market computer is that it does not actually reach perfectly efficient price computation. If it did, you could crack RSA keys by placing a sufficient number of suitably complex options trades. Markets can put a bounty on fixing incorrect pricing information, but they can also just refuse to accept corrected pricing. Everyone rushing into Facebook stock counteracted the few people concerned about the ridiculously autocratic governance structure. And now that it's obvious that such a thing was a problem, it's too late to challenge it, because now Facebook has platform holder money. Zuckerberg can bribe the shareholders to not care about their lack of control. The history of state intervention is very fraught, but there's one subset of interventions that has a better track record than most: those intended to stymie autocrats of trade. The state cannot correctly set prices better than a market can, but it absolutely can prevent other state-like entities from doing the same thing. Likewise, it would behoove the world's competition law and securities regulators to investigate and regulate the use of dual-class shares to retain control over companies you do not own. Unfortunately, the current administration is unlikely to do anything about this. Actually, to make matters worse, Texas is deliberately trying to pour gasoline on the problem by disenfranchising minority shareholders. I believe this was done specifically to give Elon Musk even more control over SpaceX, because Delaware made the mistake of actually entertaining a shareholder lawsuit over Musk's pay packet. If Facebook was an autocracy that bribed its shareholders into compliance, then SpaceX is an autocracy that says, "Fuck you, pay me". If there's one thing that gives me hope, it's that the markets are rightfully rejecting this obvious attempt at offloading Musk's toxic junk onto retail. But this is mainly because Elon failed to generate suitable hype to get the market to buy into his trash, not because markets are actually good at pricing in this specific kind of risk. [0] In fact, this is part of why you see companies go to great lengths to fight unions, even when negotiating with a union would be cheaper. The shareholder class considers democratic control (one worker, one vote) to be an existential threat.
rhplus 3mo ago
Some media companies had them before the 1980s. New York Times issued dual class in 1969 so that the owning family maintained editorial control. Berkshire Hathaway is possibly the most famous from the 80s/90s. The class A shares are significantly more expensive and proportionately even more powerful than the class B shares. The lower price version was important back when physical exchanges didn’t support fractional shares as they do today.
- wbl 3mo ago
  Berkshires share classes are different in that A is exactly ten B shares and anyone can convert A to B and hold them. The dual share classes that are bad separate control from ownership.
  - rtkwe 3mo ago
    The BRK A and B are slightly different in that A is worth 1500 B but B only has 1/10000 of a vote so it IS a somewhat lopsided value vs voting share but not as bad as the 0 vote SPCX shares that just got dumped on the market.
  - rhplus 3mo ago
    Your ratios are way off. Price ratio is 1:1500 for A to B, while voting power ration is 1:10000. Each A share is 6.67x more powerful than 1500 x B shares.
anamax 3mo ago
The New York Times Company operates under a dual-class stock structure where the Ochs-Sulzberger family holds roughly 95% of Class B shares. This family control allows them to elect 70% of the company's Board of Directors. Copied from google's response to "new york times governance" Google's AI also says that the NYT has had that structure since 1957. Ford has something similar from the 1930s. (Dodge did too until it was bought.) Raylon (synthetic textiles) did it in the 1920s and the company behind Jack Daniels did it right after Prohibition. Google says that the NYSE banned dual-class between 1926 and 1986; I don't know how to reconcile that with Ford.
- rtkwe 3mo ago
  A news org I see a valid reason for keeping two classes of stock I guess. It feels slimy elsewhere without that some editorial independence justification.
deleted 3mo ago
[deleted]
saalweachter 3mo ago
They were a thing in the previous 20's and the exchanges banned them in like the 40's (you could still have a dual-class corporate structure, you just wouldn't be listed on eg the NYSE), because investors thought that was some bullshit to have someone control a company while owning only a tiny slice of it. That rule was dropped sometime in the 80s.

by rtkwe 3mo ago

nolta 3mo ago

https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares https://en.wikipedia.org/wiki/Ivar_Kreuger#B-shares

lapcat 3mo ago
> Kreuger's financial empire has been described by one biographer as a Ponzi scheme... Another biographer called Kreuger a "genius and swindler", and John Kenneth Galbraith wrote that he was the "Leonardo of larcenists".

skybrian 3mo ago

No. Google has them too.

Arainach 3mo ago
That's absolutely still "recent" when discussing corporate governance.
rtkwe 3mo ago
Google is also pretty new in the terms I was talking about only slightly older than Facebook. I mean going back to the 80s/90s or earlier, pre current FAANG at least.

georgeecollins 3mo ago

Ford has them. What it has meant for Ford-- and will probably mean for Facebook-- is that Zuck's heirs will control the company, for better or for worse. The common justification for this is that for a media company (NYT) you want a person or family to take responsibility for the editorial content, not a pure profit seeker. Facebook has it both ways and typically denies it has editorial control. IMO, the flaw of markets is that they are short sighted. Sometimes this allows states to outmaneuver them with a longer view. Current exhibit A: China. Historically state intervention has been worse in the long run. But who knows. If we went into a depression a lot of people may think state intervention is a better system, as many admired the USSR during the Great Depression.

orionsbelt 3mo ago
Zuckerberg’s high vote shares convert to regular shares after he leaves or dies. His heirs will not continue to have super votes.
- deleted 3mo ago
  [deleted]
- shimman 3mo ago
  Don't worry, he will try to change the law before he passes this mortal coil. This is a person that has open disdain for the law and thinks he should be emperor of humanity.
  - sroussey 3mo ago
    You mean bylaw not law. No law says anything about super voting shares not surviving death.
kmeisthax 3mo ago
The USSR's main problem was not that it was socialist or communist, but that it was Russian. Russia is run by people who are adept at coopting revolutionary movements into a corrupt, authoritarian core. When left-wing libertarians say "true Socialism has never been tried", this is (along with China) what they are referring to. The theoretical arguments against socialism (or, more specifically, centrally planned state production) given by Hayek is that pricing is information and markets are computers on that information, ergo changing the information gives you a bad result. This certainly applied to the kinds of production the Soviet Union loved to engage in, but there's no particular reason why it can't apply to capitalist enterprise as well. I mean, Facebook's headcount or market cap alone is larger than some actual nation-states' population or GDP. Just like how the USSR was nominally socialist but practically engaged in exactly the same state-controlled mode of production as feudalism, today's corporate entities are nominally capitalist but practically feudalist. The medieval historians in the room would probably balk at me using the word "feudalist" to describe either, so to be clear, what I mean is "an economic system in which the majority of profit goes to landowners / platform owners / the state / etc". In this economic mode, companies can warp markets to their whims in exactly the same way Congress can. Except, Congress is democratically controlled. Joint-stock corporations are inherently oligarchial in structure: control of the company is assigned based on how many shares you can afford to buy, so the company answers to the amount of money that has capitalized it, and not any other concern[0]. The "innovation" in Facebook's IPO was to go from internal oligarchy to internal autocracy - to install Mark Zuckerberg as God-Emperor of Facebook and largely depose the shareholder class that normally runs publicly-traded entities. You'd think markets would have priced in this risk, but Facebook IPO'd at the peak of its hype and was able to get away with this. The funny thing about Hayek's distributed market computer is that it does not actually reach perfectly efficient price computation. If it did, you could crack RSA keys by placing a sufficient number of suitably complex options trades. Markets can put a bounty on fixing incorrect pricing information, but they can also just refuse to accept corrected pricing. Everyone rushing into Facebook stock counteracted the few people concerned about the ridiculously autocratic governance structure. And now that it's obvious that such a thing was a problem, it's too late to challenge it, because now Facebook has platform holder money. Zuckerberg can bribe the shareholders to not care about their lack of control. The history of state intervention is very fraught, but there's one subset of interventions that has a better track record than most: those intended to stymie autocrats of trade. The state cannot correctly set prices better than a market can, but it absolutely can prevent other state-like entities from doing the same thing. Likewise, it would behoove the world's competition law and securities regulators to investigate and regulate the use of dual-class shares to retain control over companies you do not own. Unfortunately, the current administration is unlikely to do anything about this. Actually, to make matters worse, Texas is deliberately trying to pour gasoline on the problem by disenfranchising minority shareholders. I believe this was done specifically to give Elon Musk even more control over SpaceX, because Delaware made the mistake of actually entertaining a shareholder lawsuit over Musk's pay packet. If Facebook was an autocracy that bribed its shareholders into compliance, then SpaceX is an autocracy that says, "Fuck you, pay me". If there's one thing that gives me hope, it's that the markets are rightfully rejecting this obvious attempt at offloading Musk's toxic junk onto retail. But this is mainly because Elon failed to generate suitable hype to get the market to buy into his trash, not because markets are actually good at pricing in this specific kind of risk. [0] In fact, this is part of why you see companies go to great lengths to fight unions, even when negotiating with a union would be cheaper. The shareholder class considers democratic control (one worker, one vote) to be an existential threat.

rhplus 3mo ago

Some media companies had them before the 1980s. New York Times issued dual class in 1969 so that the owning family maintained editorial control. Berkshire Hathaway is possibly the most famous from the 80s/90s. The class A shares are significantly more expensive and proportionately even more powerful than the class B shares. The lower price version was important back when physical exchanges didn’t support fractional shares as they do today.

wbl 3mo ago
Berkshires share classes are different in that A is exactly ten B shares and anyone can convert A to B and hold them. The dual share classes that are bad separate control from ownership.
- rtkwe 3mo ago
  The BRK A and B are slightly different in that A is worth 1500 B but B only has 1/10000 of a vote so it IS a somewhat lopsided value vs voting share but not as bad as the 0 vote SPCX shares that just got dumped on the market.
- rhplus 3mo ago
  Your ratios are way off. Price ratio is 1:1500 for A to B, while voting power ration is 1:10000. Each A share is 6.67x more powerful than 1500 x B shares.

anamax 3mo ago

The New York Times Company operates under a dual-class stock structure where the Ochs-Sulzberger family holds roughly 95% of Class B shares. This family control allows them to elect 70% of the company's Board of Directors. Copied from google's response to "new york times governance" Google's AI also says that the NYT has had that structure since 1957. Ford has something similar from the 1930s. (Dodge did too until it was bought.) Raylon (synthetic textiles) did it in the 1920s and the company behind Jack Daniels did it right after Prohibition. Google says that the NYSE banned dual-class between 1926 and 1986; I don't know how to reconcile that with Ford.

rtkwe 3mo ago
A news org I see a valid reason for keeping two classes of stock I guess. It feels slimy elsewhere without that some editorial independence justification.

deleted 3mo ago

[deleted]

saalweachter 3mo ago

They were a thing in the previous 20's and the exchanges banned them in like the 40's (you could still have a dual-class corporate structure, you just wouldn't be listed on eg the NYSE), because investors thought that was some bullshit to have someone control a company while owning only a tiny slice of it. That rule was dropped sometime in the 80s.