Groupon and Zynga have already raised eyebrows with the accounting metrics used in filings for their upcoming IPOs, and now they’re getting even more investor attention with their latest plans to give founders extra supervoting shares, says The Wall Street Journal.
According to regulatory filings, when Groupon goes public—which it’s expected to do as soon as next week—its three co-founders will have shares that carry 150 votes each. At Zynga, which will likely go public later in November, founder Mark Pincus’ supervoting shares will carry 70 votes each. Investors who buy regular shares in the companies will only receive one vote for corporate matters.
It’s not unusual for large companies to have two-tier voting structures in order to give founders and CEOs greater post-IPO control over matters of corporate governance. But the gap between Groupon’s and Zynga’s supervoting shares and regular shares is unprecedented, even in the tech sphere. Facebook, Google, and LinkedIn leaders’ supervoting shares have a much more typical 10 votes each.
A source told the WSJ that Pincus, in particular, pushed for his 70-vote shares as a result of a past experience as CEO and chairman of Support.com. Although Pincus held 15 percent of the company’s stock after it went public in 2000, VC firms held 30 percent, leading to his departure later that year.
This time around, he’s determined to keep a tighter grip on Zynga. According to filings, despite the fact that Zynga's five VC investors will hold a combined economic stake greater than Pincus, he will hold a larger percentage of the company's votes.
While Pincus and the Groupon co-founders have a lot to gain from their supervoting shares, potential investors might not be as receptive to the idea. The massive number of votes raises the risk that founders “will continue to run it as their own company,” corporate-governance program manager Michael Garland told the WSJ. “We believe in one-share, one-vote.”