Mind the Gap | Snap’s offering represents a disastrous corporate governance milestone
It will put regulatory reform pressure on Hong Kong and other major exchanges to eliminate all pretence of investor protection, just to win tech listings
For such a large tech offering, the Snap Inc IPO, on the New York Stock Exchange, is quickly looking pretty toxic.
Ignore that the owner of the popular messaging service Snapchat is only just making a 7 per cent gross margin whereas in previous IPOs like Facebook or even Twitter were making 50 per cent or more. Toss in the warning from the filing that Snap may never reach profitability, the usual amount infrastructure to be built, no voting rights and a high expense and the IPO begs credulity.
Snap’s $3 billion fundraising target (valuing it at up to $25 billion) could make it the third largest US technology offering in recent years, after Alibaba, which raised $22 billion, and Facebook, which raised $16 billion.
But, most of all, Snap’s offering represents a disastrous corporate governance milestone.
The IPO would be the first to offer shares with no voting power. And co-founders Evan Spiegel, chief executive officer and Bobby Murphy, chief technology officer will control the company for a period even if they resign or die. The prospectus states that a founder’s voting power would only be diluted if he cut his stake substantially or “nine months after death”.
