Snap Inc. went public and sold stock to “investors” who were content, apparently, to be in possession of equity that didn’t have voting rights.
That’s right—Snap’s stock doesn’t vote. You probably heard that.
In a sense, this isn’t new. This tactic has been successfully used by media companies in the past; think Twenty-First Century Fox (NWS/A) and Viacom (VIA/B).
But the latest monkey business with voting rights doesn’t come from old-as-Methuselah media CEOs, but from Millennial tech CEOs. Alphabet (GOOG) has split its stock into voting and non-voting share classes, and Mark Zuckerberg owns super-voting shares of Facebook.
But Snap just issued stock that doesn’t vote. There is one vote, and it belongs to Evan Spiegel.
Evan Spiegel happens to be 26 years old, and he happens to be engaged to Victoria’s Secret model Miranda Kerr. Knowing myself at age 26, and knowing what I might have been like had I been engaged to Miranda Kerr, you can forgive me if I am implying that Spiegel might be a bit distracted.
None of these tech companies have a moat to begin with, and Snap’s is smaller than most. Instagram seems determined to put it out of business with its own “stories” feature, and it’s a known fact that Snapchat users just blaze through whatever ads they show anyway.
It also caters to the ficklest of fickle demographics, and any attempts to broaden Snapchat’s appeal have the potential to drive business to some other new, shiny platform. So there is that.
But if you own stock that doesn’t vote, do you really own stock?
I mean, pretend you own 10% of a company, but you have no say in how it is run. Do you really own it? Is it equity or debt? If you think about it, it’s kind of like a covenant-lite bond. A zero coupon, cov-lite perpetual.