[harryh]

Pinterest continuing the trend of teach companies IPOing with dual class share structures:

"Following this offering, we will have two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock will be identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock will be entitled to one vote. Each share of Class B common stock will be entitled to 20 votes and will be convertible at any time into one share of Class A common stock."

[sytelus]

For tech companies, most people are investing in to founders - the company itself is just a medium. If I was an investor in tech company I would actually want dual class structure so its protected from short sighted bigger investors, likes of Icahn and hopefully pressure from Wall Street analysts to whatever extent possible. This puts some confidence in me as investor going for longer run.

[docdeek]

The Indicator podcast from Planet Money covered this topic this morning. If I remember the conclusion correctly it was that these sorts of dual class stock deals were on the way out...except for tech firms.

[pseudolus]

The verdict on dual class shares is not as unfavourable as is frequently made out in the press as attested to by a recent study in the Harvard Law School Forum on Corporate Governance and Financial Regulation:

"The limited empirical evidence on the technology and emerging growth companies that are the target of these regulations is insufficient to support the adoption of new regulations, as the evidence that is available indicates that the most recent group of dual-class companies may have performed as well, if not better, than those with a single class of stock". [0].

[0] https://corpgov.law.harvard.edu/2018/04/15/are-dual-class-co...

[ericd]

Frankly, as a long term buy and hold investor, I actually prefer to invest in companies where the founders are solidly in control, assuming I believe in their abilities. It seems like it should free them from some of the pressure to optimize for the short term at the expense of long term success.

[dingaling]

But if they aren't predicting profits any time soon you won't be getting dividends. And you'll only have weak voting rights with which to nudge corporate strategy.

So, why invest at all?

[ericd]

Why do people pay so much for Berkshire Hathaway shares, despite their declared intention not to pay dividends?

I trust that they still want to increase their enterprise value.

[somebodythere]

Because you expect the share price to grow to reflect the increased likelihood of being paid dividends in the future.

[lotsofpulp]

Expected present value of future dividends of alternative entity expected to pay dividends and capital gains from said entity is less than expected future value of capital gains from a company that isn’t paying dividends, all adjusted for certain level of perceived risk of course.

[est31]

Even as a minority shareholder you can sue a company if it acts in bad faith in a way that is bad for the shareholders.

[notyourday]

Like Snapchat.

[ericd]

Well, the other criteria is that they have to actually be good businesses. I think it's a good thing for Google, maybe not so much for Snapchat.

[notyourday]

If I recall correctly, Google was profitable when it went public.

[ericd]

Yeah, but I don't think that was short term thinking. They didn't have to mess up their long term prospects to do pull that off.

[walshemj]

Well the Daily Mail got kicked out of the index in London a while for having a dual class structure.

[notyourday]

Well, we will see if the population is smart enough not to buy into it post snapchat.

[drewrv]

This seems like a weird structure, why would anyone ever convert Class B stock to Class A?

[harryh]

The point of the structure is to maintain insider control, so when an insider want to sell some stock they do the conversation before selling to the public markets.

[zrail]

And it’s likely not optional. Any transfer of shares to someone who is not already a Class B holder will probably trigger a conversion. Iirc that’s how Facebook and Google’s shares are structured.

[travisjungroth]

I wondered how things like death and divorce were handled. Seems like that would cover it.