This case is about Snap, Inc., the six-year-old US-based technology and social media company which was in the midst of a controversy on account of its of non-voting shares. In 2017, Snap became the first company ever to go public with a structure that denied outside shareholders any voice in the company. The company concentrated control in the hands of its co-founders through the multi-class stock structure. The absence of voting rights in Snap’s IPO raised concerns among institutional investors and asset managers, who considered the move as an impediment to corporate governance and transparency. Snap mentioned the risk factor in its IPO filing and said that the co-founders would have control over all stockholder decisions because they controlled a substantial majority of the company’s voting stock. Meanwhile, corporate governance experts advised potential investors to avoid Snap because of the voting rights issue and lack of accountability on the part of the company. Going forward, Snap admitted that it may never make money and had no intention of paying cash dividends to its shareholders in the foreseeable future. However, despite the multi-class stock structure with no voting rights to its shareholders, Snap’s IPO was successful. Even as Snap’s co-founders readied an aggressive growth plan to become the biggest new publicly traded tech company, analysts questioned whether it was possible for the company to achieve this feat with poor corporate governance.

Finance Case Studies | Case Study in Management, Operations, Strategies, Business Environment, Case Studies

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Issues

The case is structured to achieve the following teaching objectives:

	Understand the multi-class stock structure of Snap.
	Analyze how Snap’s non-voting shares raise governance issues at the company.
	Understand the possible advantages and disadvantages of non-voting shares for Snap
	Discuss and debate whether Snap can maintain its high valuation with the current governance structure

Contents

INTRODUCTION

BACKGROUND NOTE

THREE-TIER VOTING STRUCTURE

GOVERNANCE ISSUES

IPO VALUATION

SUPPORT FOR SNAP’S NON-VOTING SHARES

CHALLENGES

THE ROAD AHEAD

EXHIBITS

Keywords

Initial Public Offer; IPO filing; Equity capital market; Valuation; Managerial Economics; Prospects theory; Governance; Corporate governance structure; Share offering; Multi-class stock structure; Dual-class structure; Three-tier share structure; Non-voting shares; Zero voting rights; Super-voting shares

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