Mark Zuckerberg Signed the Wrong Document • Hacker News Board

Re: Mark Zuckerberg Signed the Wrong Document

#21

Post by hacknat » Fri, Oct 30, 2015, 3:00 AM UTC

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 hear some important feedback from their fellow owners. What if 48% of the other shareholders don't like how they're doing x? It might just change how things are run.

Minority votes and feedback are important, especially when you consider that the majority of shareholders of public companies are institutional investors they have every right to make sure their feedback is taken seriously by their executives, whether or not those executive happen to be majority shareholders or not.

Don't like the rules? Then don't go public.

Re: Mark Zuckerberg Signed the Wrong Document

#22

Post by brazzledazzle » Fri, Oct 30, 2015, 3:06 AM UTC

gopowerranger wrote: post #14

toast0 wrote: post #12

This article was really hard to read because of bizarre font choices: http://imgur.com/MvCW9RP on windows phone 8.1, oddly the footnotes were totally fine, just everything else was missing several pixels on the right. Can we go bad to normal fonts please?

And now ... on to the topic!

Yes please. I'm aware this comment itself is contributing to the off-topic problem but the constant avalanche of complaints about readability belong in the comment sections and mailboxes of the sites in question.

Re: Mark Zuckerberg Signed the Wrong Document

#23

Post by pjscott » Fri, Oct 30, 2015, 3:13 AM UTC

late2part wrote: post #10

The directors only get $300k per year for serving on the BOD of Facebook? They are worth more than that!

Things generally are worth more to you than what you pay for them -- that's why you pay for them!

Re: Mark Zuckerberg Signed the Wrong Document

#24

Post by vezzy-fnord » Fri, Oct 30, 2015, 3:19 AM UTC

danieltillett wrote: post #9

meeper16 wrote: post #8

Earlier quoted context omitted.

1. facebook did not "invent" anything, especially compared to Google, they copied text entry boxes and messaging, which anybody could easily duplicate from myspace and reworked the design. Google invented something.

Facebook was very innovative, just not technically innovative. Their two big innovations were the real name policy and only letting in elite uni students to create social demand. Both seem obvious in hindsight, but nobody else at the time implemented both of these policies.

real name policy and only letting in elite uni students

Are we really going to describe these things as "innovations"?

Re: Mark Zuckerberg Signed the Wrong Document

#25

Post by tristanj » Fri, Oct 30, 2015, 3:21 AM UTC

hacknat wrote: post #21

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.

Re: Mark Zuckerberg Signed the Wrong Document

#26

Post by choppaface » Fri, Oct 30, 2015, 3:22 AM UTC

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 in a way that is not reflected in the price. Shares without voting power increase inflation, right? Furthermore, a lot of tech companies have put only a small number of shares on the open market (likely at the recommendation of banks who want demand to support the share price). I guess the company will gradually become more publicly available as employees sell.

I'd be curious to know what portion of public companies have multi-class voting and which ones have only about 10% available as public shares. If these practices are new and rare... something to think about.

Re: Mark Zuckerberg Signed the Wrong Document

#27

Post by sportanova » Fri, Oct 30, 2015, 3:22 AM UTC

jmcatani wrote: post #19

chollida1 wrote: post #5

I feel kind of bad for Mark here. There is an entire cottage industry of firms that will do nothing but look for ways to use these types of procedural errors to extract money from companies. There are law firms whose sole form of income is to have hedge funds send them their daily trades so they can cross reference them against companies who had to restate earnings, the implication being that if hedge fund A owned so…

I really like your point on the Unicorns "having their cake and eating it too" in regards to public funding. I am very worried that the technology industry is creating this new capital market that reserves access for the super rich and is completely free from goverment oversight. Are there any points in history that had similar market structure? And if so, how did those markets respond to successes and failures?

It's turned that way because of onerous regulations (Sarbanes-Oxley). We made it way too painful to go public, and now we can't benefit from most of the tech growth

Re: Mark Zuckerberg Signed the Wrong Document

#28

Post by sopooneo » Fri, Oct 30, 2015, 3:29 AM UTC

If a share barely gives you voting rights, and the company does not, and does in the foreseeable future plan to, issue dividends, then what is the inherent value of the stock? Is it just my portion of the proceeds in case of a firesale?

Re: Mark Zuckerberg Signed the Wrong Document

#29

Post by dantiberian » Fri, Oct 30, 2015, 3:30 AM UTC

choppaface wrote: post #26

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…

Fortuitously, The Information published an article about multi class voting structures today. You can read it at http://go.theinformation.com/9e6aa6 (I think this should work for non subscribers).

Re: Mark Zuckerberg Signed the Wrong Document

#30

Post by danieltillett » Fri, Oct 30, 2015, 3:42 AM UTC

vezzy-fnord wrote: post #24

danieltillett wrote: post #9

Earlier quoted context omitted.

Facebook was very innovative, just not technically innovative. Their two big innovations were the real name policy and only letting in elite uni students to create social demand. Both seem obvious in hindsight, but nobody else at the time implemented both of these policies.

real name policy and only letting in elite uni students Are we really going to describe these things as "innovations"?

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.