Under Armour and Alphabet have similar stock structures.
Activist investors are fundamentally changing the investment market. They accumulate enough stock in publicly traded companies to influence who sits on the board, then pressure the management and board to focus on short-term returns at the expense of long-term investment. Facebook’s introduction of non-voting shares last week is a preemptive move to block this sort of intervention.
Currently, Facebook FB -0.21% has a dual-class stock structure, with Class A shares having one vote per share and Class B shares, which its founder Mark Zuckerberg and company insiders own, conferring 10 votes per share. The company intends to issue two Class C shares as a one-time stock dividend, which will grant economic ownership of Facebook, but no voting rights. This structure will preserve founder control, and enables Zuckerberg to liquidate a large portion of his shares to pursue philanthropic interests, yet still retain majority-voting control—without a majority of shares. It also means that, as Zuckerberg put it, “You don’t have to worry about losing your job over a couple of bad quarters or controversial short-term decisions, and that makes it easier to make the decisions you think are correct.” In short, predatory activist investors can’t take control and push him out.