Snap’s IPO Shares Should be ‘Junk Equity’: CalPERS

The scam around the hottest Tech IPO in 3 years; a revolt by institutional investors that may have to buy the shares.
The publicly traded shares without any voting rights in a company totally controlled by just two guys should be labeled ‘junk equity,’ said Anne Simpson, an investment director at the California Public Employees’ Retirement System (CalPERS), the largest public pension fund in the US.
‘You’re constraining the capital markets in a way you’ll come back to regret,’ she told the SEC’s Investor Advisory Committee on Thursday, as reported by the LA Times. ‘Innovation, we’re interested in that; but this is an immature attempt to avoid accountability.’
They were discussing the non-voting shares issued during the IPO of Snap Inc., parent of Snapchat. It was the hottest tech IPO in three years when it went public last week, though its shares have had a very rough time this week.
Snap was on the forefront of financial ‘innovation,’ bravely going where no other IPO had dared to go before: issuing only shares without voting rights. The two founders retain total control. Some early investors have very diluted voting rights. But those who own the publicly traded Class A shares just have a pile of hype in a company that, according to its pre-IPO S-1 filing, is likely to lose money until the end of its days.

This post was published at Wolf Street by Wolf Richter ‘ Mar 10, 2017.