A fast-growing internet startup with a "visionary" founder goes public and offers negligible rights to the shareholders buying billions of dollars worth of stock. We've seen this movie before.
There are many comparisons to be made between Facebook and Snap Inc., the parent company of Snapchat. A key one for investors: the tradeoffs in buying shares of a new technology company without having a say in how it's run.
Snap is offering 200 million shares in its initial public offering, all of them non-voting. It is the first time a company has attempted to go public with non-voting stock, although Facebook and Google both subsequently issued non-voting shares.
In effect, the non-voting shares are similar to the dual-class share structures that are more common among tech IPOs. Dual-class structures are designed to make it difficult or impossible for non-founder shareholders to generate a majority vote, which is needed to make certain changes at the company, such as replacing the CEO. Non-voting shares go one step farther — investors simply do not get a vote.
But how much does corporate governance truly impact the performance at a company? The results are mixed and often reliant upon the person who is wielding control.
Every founder, including Evan Spiegel of Snapchat, wants investors to think they are the next Mark Zuckerberg and therefore deserve more control. Investors who bought stock in Facebook five years ago would have more than tripled their investment today. Same with Google — which went public with multiple classes of shares in 2004 and has given investors returns of nearly 2000 percent since then. (Neither Google founder was chief executive at the time of its IPO, but they were both heavily involved.)