Shopify IPO documents outline corporate governance strategies with concentrating voting for insiders.
Shopify filed for an IPO. It is raising around $100 million (a placeholder figure), but it is too early to know exactly how much of the company this represents.
We do know that Shopify is implementing a dual share voting structure similar to many other tech companies. While corporate governance activist types decry these types of arrangements, even a Canadian company knows how to protect the voting rights of its insiders. Proponents say these structures allow for longer term thinking and innovation.
Currently, officers and directors control about 56.5% of the voting rights, with CEO Tobias Lutke holding 14.62%. The 56.5% number is skewed because this includes investor nominees to the board, including Bessemer Venture Partners (30.3%).
The voting rights will be split up between Class B shares with 10 votes per share and the publicly held Class A shares with 1 vote per share. The prospectus outlines the risk of concentrated voting. However, it is not really a risk. It is the point.
“In addition, because of the 10-to-1 voting ratio between our Class B multiple voting shares and Class A subordinate voting shares, the holders of our Class B multiple voting shares, collectively, will continue to control a majority of the combined voting power of our voting shares even where the Class B multiple voting shares represent a substantially reduced percentage of our total outstanding shares. The concentrated voting control of holders of our Class B multiple voting shares will limit the ability of our Class A subordinate voting shareholders to influence corporate matters for the foreseeable future.”