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Founders Without Limits: Dual-Class Stock and the Premium-Tier of the London Stock Exchange



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The US has recently seen a surge in the use of ‘dual-class stock’ or ‘weighted voting rights’ (WVR) by publicly-listed companies in the technology sphere. Google, Facebook and Snap, amongst others, have adopted WVR-structure where the founders own unlisted shares to which enhanced voting rights are attached, while public shareholders only hold inferior-voting shares. This can enable founders to diversify their wealth and generate equity finance without losing control. Founders can retain control only holding a minority of the equity, and take long-term decisions largely insulated from the whims of the public markets. Founders without limits. In the UK, WVR-structure is proscribed on the premium-tier, the London Stock Exchange’s most prestigious listing-tier. With a dearth of large tech-companies listing in the UK, and a plethora of acquisitions of UK tech-companies by foreign acquirors, the premium-tier prohibition of WVR-structure could be throttling the UK’s tech-industry.

In this thesis, a theoretical and evidentiary approach is taken to the analysis of WVR-structure, one of the most significant topics in corporate governance today. It will be shown that a WVR-tradeoff operates, and, in certain circumstances, particularly in the context of long-term orientated, high-growth tech-companies, the structure’s benefits can outweigh the detriments to public shareholders. It will also be shown that the existing empirical evidence is not indicative of WVR-firms harming public shareholders. The market adequately protects itself from the perceived risks by imposing discounts on WVR-firms. If the prohibition of WVR-firms from the premium-tier stems from a fear that public shareholders will be harmed, given that the market prices-in its risk, the prohibition is not justified by the evidence.

In fact, the level of discounts imposed on WVR-firms by the market is unwarranted by stock returns and operating performance. It is contended that if WVR-structure were to be permitted on the premium-tier, it would be prudent to implement judicious public shareholder protections, which will moderate the risks associated with the structure, and reduce the cost of capital for WVR-firms. High costs of capital could deter issuers from listing even if WVR-firms were permitted on the premium-tier. Crucially, any measures must tread a fine line between protecting public shareholders, and ensuring that restrictions are not so severe that they undermine the benefits of WVR-structure and cause founders to continue to eschew the premium-tier. A balanced protection package is proposed that provides a policy-driven roadmap toward the premium-tier finally embracing founders without limits.





Cheffins, Brian


Corporate Governance, Dual-Class Stock, Capital Markets, One Share One Vote, Voting Rights, London Stock Exchange, Listing Rules, Sunset Clauses, Big Tech, Minority Shareholder Protections


Doctor of Philosophy (PhD)

Awarding Institution

University of Cambridge
Cambridge Faculty of Law Studentship, Wright Rogers Scholarship