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So if Facebook loses the lawsuit, what happens? They pay the shareholders some relatively small amount and have to pay the directors less... until Mark signs the right document then they can pay them whatever they want?
So if Facebook loses the lawsuit, what happens? They pay the shareholders some relatively small amount and have to pay the directors less... until Mark signs the right document then they can pay them whatever they want?
It will be a reminder to Mark Zuckerberg to take more care in his fiduciary duties, like signing with the correct letterhead.
If he's annoyed about it, there will be a new job opening in the Facebook legal department.
So if Facebook loses the lawsuit, what happens? They pay the shareholders some relatively small amount and have to pay the directors less... until Mark signs the right document then they can pay them whatever they want?
It will be a reminder to Mark Zuckerberg to take more care in his fiduciary duties, like signing with the correct letterhead.
Earlier quoted context omitted.
Well if you are the first to introduce something then I think it is fair to say you are being innovative. They were both critically important to the success of Facebook so I think we have to give credit where credit is due.
A real name policy cannot possibly be an innovation, or if it were it predates all modern technology. FWIW, Usenet culture was overwhelmingly based on people communicating under their real names. Ergo, not the first to do so. The second - initially limiting your userbase to an exclusive demographic, is but a restriction or marketing maneuver at best, and again hardly the first to do such a thing. You have to be inten…
Earlier quoted context omitted.
What makes you say it's not reflected in price?
There are a ton of reasons for the price to be "wrong" if a particular practice is unusual or new. Markets only function as well as the people involved in them. If the people are all acting (unwittingly) on incomplete, incorrect, or insufficient information, then one would expect there to be risks that haven't been "priced in".
It doesn't mean that the non (or lesser) voting shares are priced wrong; in fact, by definition, they are priced at what the market values them.
Also, different classes of shares aren't exactly 'new' or 'unusual'. http://www.slideshare.net/nimishhalkar/a-brief-history-of-pr... claims that the first preferential shares were issued in 1836 (yes, it's a different kind of 'preferential' than what we're talking about, but it's still a species of the genus 'share differentiation') E.g. they're a very common vehicle for structuring profit sharing in several civil law jurisdictions I happen to know of.
An interesting issue here is if the 2-voting-class design is sustainable for new companies. The bottom of the article notes the issue with the legal docs "took place in 2013." I wish the author would have spent more time grappling with 2-class voting (which TBH the major focus of the article) rather than Zuck's clerical error. The problem with 2-class voting is that it dilutes the inherent value of non-voting shares…
The interesting trend now is that so many tech companies have dual-class supervoting shares. It sends the message that a few titans of industry basically make all the decisions, and everybody else is along for the ride. Which is probably where we are, economically, right now, but seems disheartening.
The most famous of these bottom-feeding attorneys, Bill Lerach, built an estimated net worth of $700 million [1] by creating exactly these kinds of nonsensical shareholder lawsuits against public companies. He also earned a short prison stint and a $7.5M fine for bribing shareholders to become plaintiffs in 150 of the cases he filed. Here is a fascinating video [2], entitled The Rise and Fall of Bill Lerach.
[1] http://www.bloomberg.com/news/articles/2011-10-12/convicted-...
OK, but who was the legal eagle or director who gave him the wrong form? I would expect that somebody besides Zuckerberg had a job to get it right, and probably should be on the hook for screwing up one way or another.
An interesting issue here is if the 2-voting-class design is sustainable for new companies. The bottom of the article notes the issue with the legal docs "took place in 2013." I wish the author would have spent more time grappling with 2-class voting (which TBH the major focus of the article) rather than Zuck's clerical error. The problem with 2-class voting is that it dilutes the inherent value of non-voting shares…
Dual-class voting structures have been around forever. Ford and Berkshire Hathaway are two prominent examples. Historically, they've been relatively rare, and the non-voting shares don't trade at much of a discount. It's rare that individual shareholders get to exercise their voting rights anyway. The interesting trend now is that so many tech companies have dual-class supervoting shares. It sends the message that a…
It may seem like splitting hairs, but the Chancery court's decision makes sense. Corporate governance sounds boring and technical, but it is an important sounding board for valuation and consent. Imagine a company where two people collectively owned 51% of a public company, one of them more "in charge" than the other. If they start making all kinds of ad hoc decisions without shareholder consent, then they will never…
Facebook did not want to go public, they were forced to do so because of an obscure SEC investor rule. There was quite a bit of coverage on this when they announced their IPO.