If I a company isn't paying dividends or buying back stock, and we (the shareholders) can't coerce said company into doing so at some point, it's essentially an indestructible piggy bank in which money evaporates while you helplessly watch.
One of the big risks that Snap is taking in this IPO is that their common stock has no practical value.
As you said, stock generally has two ways of being worth something: partial control and/or profit sharing.
Snap common stock has neither. It's only value is its ability to be sold to someone else. It's basically a currency? Is $Snap the new BTC? I have no idea.
On a long enough timeline, you have to believe that Snap will either disburse dividends, be acquired by another company or find some other way to convert ownership into actual cash.
I'm not avoiding your question—I agree that it should be based on underlying value—but that seems to be the only reason to buy $SNAP
it's pretty tenuous, but real nonetheless.
Normally Class A has the voting right and Class B has not.
But I would also like a clarification on this from somebody that actually knows. The S1 filing for Snap Inc. states:
"We have paid a stock dividend of our Class A common stock on our capital stock in the past and from time to time in the future may pay special or regular stock dividends in the form of Class A common stock, which per the terms of our amended and restated certificate of incorporation must be paid equally to all stockholders."
"Equally to all stockholders", does that mean all Class A holders or both A and B holders?
I am a little puzzled at some of the latest innovations in the US stock markets. I can understand investing in a company that a small group of insiders will always have majority control in, as long as all owners are treated equally wrt. all forms of payouts. I really don't understand why the market would assign value to a stock class with no voting rights and no plausible scenario for returning capital to stockholders.
Why should this necessarily be the case? There are many reasons to buy a stock. Sometimes leadership is an issue, and getting rid of it is an opportunity.
FWIW, there are a lot of people who's goal isn't to sell but to collect dividends due to the long term success of a company.
For me, despite ever maybe owning 0.0000000000001% of a company, the power of mutual ownership means all perspectives are taken into account. And that generally means more accurate valuations, and therefore safer investments.
Private held companies: not necessarily traded. Your investment is illiquid. Nobody outside is really watching. The managers can fly the company into the ground before you can find a buyer, and voting is your only shield against this.