Why? I don't see any problem with dual class shares:
1. It's not like anything is being hidden - people who buy shares without (or with less) voting share rights know what they're getting, and can adjust the amount they're willing to pay for those shares accordingly.
2. Dual share is a double edged sword: if you believe and want a visionary founder to stay in control, you're good. At the same time, you should be clear that if the visionary founder goes off his rocker, there is not much people will be able to do to oust him.
Zuckerberg pretty much shows these pros and cons perfectly. People were wringing their hands at the end of last year when Meta stock was in the toilet that there was nothing anyone could do to replace Zuckerberg. Now, though, Meta is up over 150% over the past year, and the fact that Zuckerberg could play a longer game and wasn't just ousted due to the share dip was probably ultimately good for investors.
What's wrong with it? If people want to be allowed to buy/sell second-class shares that don't have voting rights, then I don't see the problem with there being a market for that.
It’s not a free market. Your options are buy the class of stocks that the company wishes to sell, or not participate at all. Therefore it can be aggressively abused to disenfranchise public shareholders who have no say in the creation of share classes in the first place.
One important role of government is to set and maintain standards for listing on markets, so that customers are protected. An example of such a rule would be that all publicly traded companies have equal voting rights across all share classes: one share, one vote.
> Therefore it can be aggressively abused to disenfranchise public shareholders who have no say in the creation of share classes in the first place.
Elaborate on this, because I think I'm misreading it.
It seems to me like shareholders, generally already have a vote. Converting those shares, from voting to non-voting, would be quite illegal (at the very least breach of contract) without shareholder sign-off. Which they probably wouldn't do... y'know... because they're the shareholders.
What's being discussed is issuing different shares (with approval of the voting shareholders). And if you don't like that, you can... just not invest in that company. There are several other companies you can invest in if that's what you want.
And if the companies that offer only non-voting shares dominate (probably being driven by the founders)... most investors would probably want that. Most investors are looking for a return first and foremost.
> An example of such a rule would be that all publicly traded companies have equal voting rights across all share classes: one share, one vote.
I agree that it's an example of such a rule. Do you have an argument for why it's a good rule?
>Your options are buy the class of stocks that the company wishes to sell, or not participate at all.
Respectfully, I think you're confused about what a "free market" is. What you're describing, where market participants can compel the sale of a firm's assets, is antithetical to a free market.
Free market: “voluntary exchange and the laws of supply and demand provide the sole basis for the economic system.”
It’s voluntary exchange, yes, but it is not a driven by supply and demand. In the same way that the 1970’s oil market driven by the OPEC cartel was not a free market either. If you don’t like the control that Zuck has, can you express that dislike by buying shares of Meta that don’t include unequal voting rights? You can’t, because this is an issuer controlled market.
It is a free market though? Sellers in a free market are free to sell what they choose, which includes not selling things they don't want to sell. If the government were to step in and _force_ public companies to sell stock they don't want to sell, that would be the opposite of a free market, by every definition I've heard of.
> One important role of government is to set and maintain standards for listing on markets, so that customers are protected. An example of such a rule would be that all publicly traded companies have equal voting rights across all share classes: one share, one vote.
That is exactly what you argued for. Your rule would force public companies to offer up for sale shares with equal voting rights, whereas today many do not want to do so.
I'm not saying it's bad. Perhaps it's a good rule. It's just that you said you want a free market, and then proposed rules that in fact detract from a free market.
