Snap IPO: A Lot More at Stake than Just Toxic Financials

Jon Blogosphere, Economy, Market Commentary, Politics

Silicon Valley hubris seeks third-class vote-less stockholder.
Snap Inc., the parent company of SnapChat, filed for an IPO on Thursday. The filing revealed just how toxic this deal is going to be, not just from a financial point of view – a risk IPO investors are willing to take in order to grab the next Google or Facebook – but from a corporate governance and shareholder-rights point of view.
This has implications far beyond Snap: If Snap’s current owners can pull it off and get away with it, other companies will start doing the same thing, and it will forever change what it means to be a screwed stockholder.
Voting rights have already been diluted as our Silicon Valley heroes, such as Google and Facebook, have made a joke out their common shareholders, but they still get to vote, even if in ludicrously diluted form.
But Snap will take it to the ultimate level: new shareholders will get no voting rights at all. Zilch. That’s a first in the history of US IPOs. These will be the three classes of Snap shares:
Owners of Class C common stock, which include co-founders Evan Spiegel and Robert Murphy, will get 10 votes per share.

This post was published at Wolf Street on Feb 3, 2017.