This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.
Stay current on changes and developments in corporate law with a wide variety of resources and tools.
Blue Apron Holdings Inc.’s three-tiered stock structure could provide a model for other young firms looking to maintain founder control even after going public.
The meal-kit delivery company plans to issue 30 million shares of common stock at $15 to $17 each in its upcoming initial public offering, according to a June 19 regulatory filing. Those shares will each carry one vote while Blue Apron’s chief executive officer and other holders of a second share class get 10 votes each, giving them control of voting outcomes. A third class of stock without voting power is not being sold now but could be later.
Stock structures with unequal voting rights have become more popular in recent years with companies from Facebook Inc. and Fitbit Inc. to GoPro Inc. and Google. Snap Inc., the company behind the Snap Chat messaging app, recently became the first in the U.S. to go public with stock lacking any voting rights. Those shareholders have no say in company matters such as board elections and pay policies.
The flak that Snap got from institutional investors who favor a one-share, one-vote policy likely played into Blue Apron’s thinking.
“I think what you see with Blue Apron will be a lot more typical than what you saw with Snap,” David Berger, a Palo Alto, Calif.-based partner at the law firm Wilson Sonsini Goodrich & Rosati, told Bloomberg BNA. Berger helped Google, now part of Alphabet Inc., with its precedent-setting adoption of non-voting stock a decade after its IPO.
Unlike Google, Blue Apron won’t have to get approval from public shareholders to create no-vote shares. And unlike Facebook, it could avoid a lawsuit from minority shareholders, who took issue with the board’s process for approving a new share class that lets founder Mark Zuckerberg maintain voting control even if he sells most of his stock.
The Council of Institutional Investors’ executive director Ken Bertsch said Blue Apron’s approach is also “slightly better” than Snap’s because initially offering voting shares means it will have to provide more disclosures and hold annual shareholder meetings.
“Some of our members think that’s quite a significant difference,” Bertsch told Bloomberg BNA. “Others think it’s a difference but not terribly significant.”
Since Snap’s IPO, the council has been appealing to index providers to bar non-voting stock from their benchmarks. S&P Dow Jones Indices is seeking feedback from the investment community on the subject, as are FTSE Russell and MSCI Inc., both of which have put forward proposals to establish a voting power threshold for companies to meet.
The world’s third-largest asset manager doesn’t think index providers should be held responsible for stemming the tide of companies that “marginalize their investors” by issuing shares with unequal voting rights. Profit-seeking stock exchanges that compete for company listings aren’t likely to restrict issuances of no- or limited-voting rights either, State Street Global Advisors said in a recent paper.
“We think there should be some regulatory review of these practices and whether they’re in the best interest of the public investor,” Rakhi Kumar, head of environmental, social, and governance investments and asset stewardship at State Street Global Advisors, told Bloomberg BNA. Kumar spoke out on the importance of equal voting rights earlier this year at a meeting of an advisory committee for the Securities and Exchange Commission.
An SEC spokeswoman declined to comment on what the commission took away from that meeting. It doesn’t seem likely the agency will step in, since its new chairman, Jay Clayton, has been vocal about the need to reverse the decline in the number of publicly traded companies and IPOs in the U.S. Clayton’s first high-level hire at the commission was an attorney who worked on the IPO for Alibaba Group Holding Ltd. and a number of other companies with dual-class stock.
To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bna.com
To contact the editor responsible for this story: Yin Wilczek at ywilczek@bna.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)