I recall some of my first stock purchases, tiny amounts from a discount broker as I was a punk ass kid with big dreams. With some money from hustling I bought a few shares, after reading the WSJ newspapers that I would get from Walden Books.
Then my tech career took off, so I had a few more bucks. Just a tad bit later the tech boom happens. Here I was thinking I was Gordon Gekko getting crazy returns from my “steller analysis” but it was just luck. And even more than just luck, I actually rested some of the money before the bust and was able to avoid disaster (a mentor taught me to rest money often. Thankfully, I listened.)
The reality was, I was picking thoroughbred losers, but it was good times in the stock market….
So, I have witnessed the boom and the bust. Also like all of you, I keep hearing about the next tech bubble, the next tech bubble, we are in a bubble, bubble bubble bubble, ahhhh just shut up already!
And here we go now with the Snapchat IPO. Really a first of its kind with three classes of stock in which the founders get a 10x multiplier on their votable shares. And that results in their complete control over pretty much everything, even if they leave. And when you jump on your Robinhood account next month to cash in, just know that those Class A shares get you no voting rights.
That is the real buzz here. You, as an everyday investor, gets no voting power (you can go to the shareholder meeting though, yay!). Doesn’t this partly undermine our markets? Facebook and Google are similar but not this intense in terms of control.
This is like asking your parents for money and sticking your hand up in their face and saying: “Don’t tell me how to spend it!”
I don’t know if we are in a bubble or not, but this will likely be the new trend for super-hot tech companies and I have to say, good for them! Keep control, this is every founders dream.
It just sucks for investors. But, more importantly, if this how it will be, does it just encourage more short term focus over long term investment? But if you believe it’s going to rocket to the moon, do you care if you have voting power or not? Not really right? If you’re getting results, you give two shits about voting rights.
But after you drop a chunk of your nest egg in and it drops by 25% because of poor management or decisions, how will you feel then? Yeah, you can’t do anything about it. And that is the reason why many will avoid it.
With the rise of the activist investor we know why this is happening, but part of it just seems to defeat the purpose of investing in companies. I guess this is a sign of the times.
If you’re a startup and want to own your future and pretty much control your business and day even after going public, this seems to be the new model to follow.
But as investors, we may choose to take our money elsewhere.