Dual-Class Shares, The Founder-Friendly Way to IPO.

Did you know that eventhough Snap co-founders, Even Spiegel and Bobby Murphy, only own 22% of the company, they hold 88% of the voting rights? Wait what?! How you ask? Well welcome to the Dual-Class Share Club.

What the heck are Dual-Class Shares you ask? Well simply put, dual class shares, are well, 2 classes of stock. One class for the… normal investors and one class of special stock, with more voting power, for “special investors”, normally the founders and top management.

Almost all new tech listings utilise this structure as it allows the founder(s) to maintain control without having to hold equity that would normally be needed to have that control, which allows them to raise more money to expand, without ceding control. Needless to say this is a very founder-friendly form of public listing.

Take Mark Zuckerberg (@Zuck) for example. He holds less than 1% of publicly traded stock but has 60% of its voting rights, which then explains his ability to make massive decisions, like buying WhatsApp for $22 billion, with little consultation with other stakeholders.

Once upon a time dual-class shares were used mostly by family-owned firms, like Ford and Warren Buffett’s Berkshire Hathaway, and media companies but starting with Google in 2004, this method of listing was then quickly adopted by a new age of tech companies.

So as more and more tech listing take place in ‘Founder Friendly’ environments, more and more stock exchanges are becoming ‘Founder Friendly’ in an attempt to lure over these large, or soon to be large, tech companies, from Alibaba to Facebook. Particularly Asian exchanges that have lost out to the west in recent times as Chinese tech firms, like Alibaba, opt to list in the U.S. instead of anywhere in Asia.

While this is definitely good for founders, what about companies or investors? Well we’ll discuss that the next time.


Intel Inside(r) Trading?

In case you haven’t already heard, last week Intel filled us in on some pretty bad news, security flaws in billions of their chips across the industry.

Yea, billions.

Now that isn’t my personal interest here, companies are responding to the problem and patches are either being built or have been released.

What could be more interesting than a massive systemic security flaw? How about the CEO of Intel dumping $39 million dollars worth of stock and options BEFORE telling the world about this, little problem.

Needless to say this has raised a few questions and not too mention his confidence in the company going forward.

CEO Brian Krzanich reportedly sold as much as he could at the end of November, and now holds the minimum amount required by a CEO of Intel.

Intel is telling us that the stock sale is unrelated to knowledge of the security flaw, insisting that it was in fact a pre-arranged plan with an automated sale schedule and that that sounds kind of reasonable, UNTIL you realise that he made these pre-arranged plans only at the end of October. The minimum time needed for such a plan, AND MORE IMPORTANTLY he sold about 10 times the dollar value of stock and options he normally does, retaining the bare minimum instead of the approximate 500,000 shares he usually does.

At this point it doesn’t look like the SEC is going to look into this with Brian having covered his bases with all the beautiful technical loopholes at his disposal.

Like a captain jumping off a sinking ship before everyone else even knows there’s a hole in the goddamn boat, it’s definitely quite the bastard move.

That said though, for a reported net gain of $24-25 million dollars, any of us MIGHT have done the same, especially knowing the possible incoming risk to value of said stock and options.

Uber is a Taxi Company

A landmark ruling by EU’s top court recently has effectively classified Uber as a transport service and as such it should be regulated like other taxi operators.

Uber has always argued that it is simply a digital app, an intermediary between drivers and customers and thus should fall under lighter EU rules for online services.

Well that doesn’t seem to be the case anymore. At least, not in Europe.

Catch the episode on Anchor or check out your local Podcast app for ARKAY Radio 📻

This stems from a 2014 complaint by the professional taxi drivers’ association in Barcelona that alleged unfair competition from Uber’s non-professional drivers in Spain and also charged Uber with “misleading practices.” Following this latest court ruling, Uber said that nothing will change as it already operates under the transportation law in the EU – – – and in fact thinks that — “it is appropriate to regulate services such as Uber and so we will continue the dialogue with cities across Europe.” This landmark ruling could have a systemic effect to the digital and tech scene as a whole and make it much harder for start-ups to argue that they are simply a button on a smartphone and – – therefore not accountable to their workers and clients.

This underscores the dilemma that governments face when considering disruptive technology companies from Airbnb to Facebook:

should these companies be free to innovate and reshape the rules? Or be forced to conform with the rules that restrict their more traditional competitors.

Uber has been great since it came onto the scene in 2011 and it has transformed and distrupted the taxi industry

However as it did so, it also picked up a series of complaints, scandals and lawsuits.

This brings to mind Mark Zuckerberg’s old adage “Move fast and Break things” where new tech companies and startups emphasized building and growing fast as opposed to worrying about potential fallouts and repercussions

This ruling comes at a critical time for Uber, in light of the potential, and complex, deal with the SoftBank-led consortium.

Uber’s existing shareholders must decide by Thursday, December 28th, 12pm PT, whether to sell their shares to SoftBank for just about 33 dollars per share, a 30% discount to Uber’s latest valuation, or whether to wait until at least 2019 for an initial public offering.

At least 14% of shares must be sold to SoftBank for the deal to close.