Voting Rights Gone in a Snap – Unequal Shareholder Voting Rights Back in the Spotlight

The recent initial public offering of Snap Inc.’s Class A common shares marked the first-ever IPO-related listing of common stock without voting rights on a U.S. stock exchange. While other companies like Google, Facebook and Under Armour have gone public with dual-class equity structures, the public float in these initial offerings typically had voting rights – commonly one vote per share – with founders, senior management and/or pre-IPO investors receiving equity with as many as ten votes per share.

Some observers are praising the IPO-related combination of listed non-voting public shares and unlisted high-vote founder/top management shares as the innovative, “next big thing” in capital formation. But Snap’s IPO construct has also reinvigorated investor calls for reform of stock exchange listing standards that permit IPO-related listings of such shares, amid concerns that other, similarly situated companies might follow suit to the detriment of investors.

For a summary of the SEC’s Investor Advisory Committee Meeting on unequal shareholder voting rights and a discussion of the history of shareholder voting rights and possible future implications, see our Alert, available here.