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Comment by PhilWright | Hacker News Reader

I have to say it feels like the founders want to have their cake and eat it. They want the money that comes from an IPO but they don't want to give up any control. Facebook is the same, Zuckerberg has the majority of the voting shares but a lot less than 50% of actual shareholding. This seems to be becoming increasing common with tech start ups.

If you want others to invest and take on a financial risk then they should get an equal and fair voting share. If I was the stock exchange I would ban this kind of crap.

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It's a marketplace. There's no "should" to transactions.

As a buyer, you have no right to dictate what gets sold. There "should" be no imperative that the seller is beholden to.

If the business wants to sell shares with no voting rights, they'll do it. If nobody buys, then they'll change it.

"As a buyer, you have no right to dictate what gets sold. "

Not quite.

This is why there are tons of regulations (most of them good) around being a publicly traded company.

I don't see what the upside is to preventing founders to sell non-voting shares to the public. There are always other ways to raise capital with negotiated terms. The great thing about publicly traded companies is that it allows anyone to invest in a low cost standardized and liquid fashion. Onerous restrictions on the IPO market will just discourage IPOs in favor of other methods of raising capital where the gains are not available to smaller investors

Because a shares without a vote cannot protect themselves from being diluted or wildly uneven dividends and buybacks.

It has happened in the past.

Of course there is a risk in that, and that's why non-voting shares usually trade to a discount to voting shares. If the voting members fleece the non-voting members, this will make it increasingly difficult to raise money in the future without diluting ownership (GOOG vs GOOGL is about 3% discount)

Then don't buy those shares.

Can you explain why it will be different this time around to have an unregulated public market that lead to the great depression? I ask because your comment would apply to any regulation in the public markets. Can you at least explain why this specific situation would not be problematic?

The great depression was awesome, amirite?

> It's a marketplace. There's no "should" to transactions.

You say that, and many may agree with you, but the regulators may have a different view point and may take contrary actions.

> If I was the stock exchange I would ban this kind of crap.

If I were the stock exchange, I would let my customers decide what they were willing to buy rather than dictate to them.

Besides, most investors don't care about voting rights, because they will never own enough shares for their voting rights to matter.

Given that more and more shares are held in index funds, this is even more true.

There are even some people who argue that index funds will use their voting power to influence companies not to compete with other companies in the same index, which will lead to dysfunction in the market. Matt Levine on Bloomberg View mentions these arguments from time to time.

When the New York Stock Exchange had real power, they did ban this kind of crap.

Realistically what are most shareholders going to with a voting share? Unless you are big fund manager with a significant voting block, what are a few votes going to do for you? I think most people are content to put their trust in the people who got the company this far, for the most part their interests should be aligned anyways.

Realistically what are most shareholders going to with a voting share?

Vote your shares, or be an activist shareholder, if the business goes south.

Very few shareholders have enough shares for their votes to matter, pursue any kind of activism, or have any influence over the companies they invest in.

People are free to not buy the stocks. Clearly the tradeoff hasn't dissuaded Facebook shareholders.

Yeah, personally I would be really upset if my fellow shareholders voted for a poor direction for the company. So, if the vision and direction of a company's leaders continue to do well for the company, I'd totally be on board investing. I wouldn't have to worry about the public eye being reactionary to any speed bumps.

Instead of banning it, what is the harm in letting the supposedly sophisticated investors who play in the stock market determine if it's worth the risk of not having a voting share in a stock or not?

I'm normally one to say "Disclose and no foul", but the problem is how do you distinguish these shares when they are one or two levels deeper.

I don't really want one of these stocks in my index fund, but I'm stuck with Google (who also runs like this) generally being part of such a thing.

I don't see why you would care about voting rights in an index fund. But anyway, if you don't like such stocks, you should probably avoid index funds altogether. You have no control over what is in the index -- some indexes change frequently, and some index funds switch to different indexes.

I would much rather see the entrepreneurs execute on the company's mission rather than let short term Wall Street hedge fund managers and bankers dictate the company's direction. Facebook has done incredibly well by having Mark on the lead without too much external influence. Given how visionary company Snap is, I think this will be the best for them.

On the other hand, investor usually focus on short term return while founders may focus on long term vision (just my wild guess). Their objectives might not align

What makes you think that the outside investors know more about what's best for the company than the founders / management with large ownership stakes themselves?

Are you sure that giving up voting rights is a good thing for the future success of the company? Why not let individual companies try this idea - maybe it's a good thing?

The question really just is at what price will the market clear given the terms being offered. There's generally always a price.

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