Peter Kafka

Recent Posts by Peter Kafka

One Thing Twitter Won’t Have When It Goes Public: Two Classes of Shares

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Stock image copyright Norman Chan

It’s standard practice for many media companies, and many tech companies, to issue two kinds of shares: The kind that people like you and I can buy, and the kind that the people who run the company control.

That dual class structure effectively means that a small number of people can control a public company, even if they don’t own a majority of the company’s shares. You can argue the pros and cons of that structure, but it’s quite common.

And it’s why people ranging from the Sulzberger family (New York Times) to Mark Zuckerberg (Facebook) to Sergey Brin and Larry Page (Google) get to run what are in many ways private companies, even though their shares trade publicly: There’s almost no chance an outsider can buy up shares and push them around.

But Twitter, which is both a media and a tech company, isn’t following in their footsteps. The company’s S-1 notes that it has only one class of shares. So Dick Costolo and Evan Williams aren’t given any special powers — their shares entitle them to the same voting power that your shares give you.

The messaging here is clear: “At Twitter,” the company’s filing would like to say but can’t because it can’t actually speak, “we are way more responsive to shareholder interests than many of our peers.”

There’s a caveat, of course: Twitter’s board retains the right to issue preferred stock, which could indeed come with special voting rights and other powers. It’s the kind of thing you might see employed if a corporate raider like Carl Icahn ever showed up at the door with big ideas.

But those shares don’t exist yet, and Twitter said it doesn’t have any plans to issue them.

So for now, the company is an interesting anomaly.

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google