It seems that the big investors are finally getting fed up with stocks that don’t come with voting rights for shareholders.
Mutual funds, asset managers and other large institutional investors are finally pushing financial regulators to stop firms from issuing different classes of shares that often keep control of the company in the hands of founders and early investors.
I have a client that worked for Wrigley, he was allowed to purchase stock but it was the non-voting class as was all the other employees stockpurchases. This class level was not all the openly traded either. It had to be sold back to the company.
The issue especially affects tech firms, which routinely issue multiple classes of shares to different investors. Snapchat parent Snap Inc. just became the first firm to go public exclusively with nonvoting shares, for instance.
Defenders of the practice say that it lets fast-growing tech companies invest for the long term without worrying about pleasing Wall Street.
While critics say nonvoting shares curb shareholders’ oversight, rights and the ability to protect them from overall management stupidity.
The companies want all the benefits of complete ownership but handcuffing the investors like bondholders, but with an upside potential.
But large institutional investors having voting rights can go awry, look at Lambert on how he bought a small percentage of Kmart, named himself ruler and then bought Sears and ran everything into the ground.