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Recent technological companies went to IPO with publicly traded stocks that have 1/10th of voting power of the privately held stocks.

Facebook, Google, GoPro are examples of such companies.

Usually there is class A shares with 1/10th of voting power of class B shares and insiders own > 10% of class B shares.

In this case as long as insiders hold > 10% of the company, it is not possible to change anything in the management structure, vote for dividends or complete hostile takeover (think Warren Buffet acquiring Berkshire Hathaway).

In this case, what's truly the intrinsic value of stocks with diluted voting power?

  • Firstly, you would still get dividends, and secondly, your conclusion that it is not possible to change anything is based upon the assumption that the insiders all act in agreement, which they do not necessarily have to do. In your scenario, the diluted voting power stock holders will still hold sway in case of a major disagreement between the insiders (though a hostile takeover through standard means is indeed ruled out). – tomasz Apr 1 '15 at 9:15
  • Company directors still have a fiduciary duty to act in the best interest of all shareholders, not just the majority that voted them in. – Chris W. Rea Apr 1 '15 at 12:23
  • @ChrisW.Rea, but sometimes not paying dividends and investing in future can be positioned as acting in the best interest of all shareholders. – Boris Suvorov Apr 2 '15 at 16:22
  • Indeed. But my point is there remains recourse (in the courts) if minority shareholder rights are ignored. Proving it wouldn't necessarily be easy unless the duty were clearly breached. – Chris W. Rea Apr 2 '15 at 18:02

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