STOCKS | Tech Founders Keep Voting Control While Raising Capital Through Public Markets

Technology companies are using special share structures to raise capital from public investors while keeping voting control concentrated among founders. According to Sina Finance, Anthropic’s October 26 IPO filing says an entity jointly owned by its seven founders will receive a Class F share before the IPO, giving them 50.1% of shareholder voting rights; the share has no economic rights but includes the power to elect some directors. Anthropic also established a long-term public-benefit trust whose trustees can elect and remove a majority of the board, leaving the founders and trust with all board-election rights. SpaceX went public in June with a dual-class structure: Class A shares carry one vote each, while Elon Musk’s Class B shares carry 10 votes each and special rights to elect a board majority. Musk retains about 82.4% of the voting power. Meta’s board recently approved non-voting Class C shares that could be used to raise funds, pay employees, and finance acquisitions without diluting existing shareholders’ voting rights. As of October 1, Mark Zuckerberg held about 13.4% of Meta’s economic interest but controlled 60.6% of its voting power. A proposed California wealth tax vote scheduled for November 3 was also cited as a factor in Meta’s changes; Zuckerberg had assessed that selling shares to pay the tax could reduce his voting power to about 53%. The article says concentrated founder control can support long-term strategies but limits ordinary shareholders’ ability to influence company decisions. Since its 2012 IPO at $38 a share, Meta’s stock has gained more than 1,500%. At Snap, Evan Spiegel holds more than half of the voting power, and he and co-founder Robert Murphy control more than 99%; publicly traded Class A shares have virtually no voting rights. Irenic Capital Management called on Snap to close, spin off, or independently finance its augmented-reality glasses business and to give ordinary shareholders voting rights. As of October 30, Snap traded at about $5.34, nearly 70% below its $17 IPO price in 2017. S&P Dow Jones Indices lifted in 2023 a restriction introduced in 2017 that had barred newly listed companies with multi-class share structures from the S&P Composite 1500 and its component indexes. The arrangements give founders greater financing flexibility while allowing them to retain control, while investors may have limited ability to affect company strategy.