I heard today that Facebook holders are upset about not having sufficient voting rights. Zuckerberg took the majority of voting rights (58%) when it IPO'ed.
It is like paying the majority for a house, but not having any say in how the house is used.
I don't know why anyone in their right mind would pay premium prices for companies in an IPO with huge losses AND also give insiders the voting majority. Now, those non-insider buyers have no voting power to override decisions that they are not on board with. What were they thinking?!
And here we go again….
There have been IPO's recently that had the same makeup - huge historical losses, premium IPO share prices and voting control concentrated in the hands of insiders after the IPO. I have seen other companies where senior management has a fraction of a percent of shares and they still ignore shareholders or work the system to their advantage. If senior management has the majority of voting rights, what chance does any other holder have in controlling corporate governance? Answer – none, nil, Nada !
It is bad enough to give a company money that is losing a huge amount of money, but to also have no way to control management through voting rights, is just inane.
This is where those approached about buying these types of IPO’s should vote with their feet and walk away. All I can do is just shake my head and wonder how they got their funds to buy the stocks. Unbelievable!
