Snap is going to be public next month. The founders of the company Evan Spiegel and Bobby Murphy wanted the company to go public, but at the same time, they didn’t mean to run it as a public company.
Public companies need to be answerable to their shareholders who can question when they don’t like how the company is run. The company management in the publicly run companies need to take permission from their shareholders for financial decisions like “Are they paying too much to their executives?” If they want to take over any company then it is not just the decision of the founders alone. In a nutshell, we can say in a public company the shareholders have some influence and control on the company.
Snap founders didn’t want any of this. Hence, in their highly anticipated IPO (Initial Public Offering) that is due in a few weeks from now, the company is offering exclusively nonvoting shares to its shareholders. This is the first time in the history that any company is attempting this type of share issuance in a public debut.
Kai Liekefett, a partner at law firm Vinson & Elkins said, “It’s all about control. There’s no other reason. There’s no tax reason, no business reason.”
The biggest selling point of the Snapchat app was that the pictures you shared disappear a few seconds after you viewed it. This was a big boon for people who lacked the impulse control. The popularity of the app can be understood from the fact that Facebook offered $3 billion to buy Snap in 2013.
When Snap was started, Lightspeed was the first institute to invest in it. It is a Silicon Valley-based venture capital firm and it invested $485,000 in the company. Today, it is all set to reap more than a billion. But, while making this initial investment, Jeremy Liew, the venture capitalist had such terms signed up that it gave him immense power over the company’s future financing round. This was something that irked the founder Mr Spiegel and today when he is going for IPO that incident still lingers in his mind. This is probably the reason he is coming out with exclusively nonvoting shares so that all control remains with the founders only.