Five Years of Iron RuleBy http://profile.typepad.com/1237764140s22740 // October 24, 2011 in Exit Strategies, Founders, My Favorite Risk Factors
Similar to Zillow, Groupon founders are to hold "supervoting" Class B common stock. This concept was part of the disclosure when Groupon originally filed the S-1 with the SEC back in June.
Since then, some blanks have been filled in. Each share of Groupon Class B common is to have 150x the voting power of a share of Class A common, the security to be offered in the IPO!
Here's how the Groupon S-1, as amended last week, describes the prospective impact of the voting power of Groupon's founders, following the IPO:
"After this offering, our Class B common stock will have 150 votes per share and our Class A common stock, which is the stock we are selling in this offering, will have one vote per share. . . . [F]ollowing this offering, our founders, Eric P. Lefkofsky, Bradley A. Keywell and Andrew D. Mason, will together control 100% of our outstanding Class B common stock and approximately 34.1% of our outstanding Class A common stock, representing approximately 58.1% of the voting power of our outstanding capital stock. Messrs. Lefkofsky, Keywell and Mason will therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future."
But here's the really interesting development, something not contemplated in the Groupon S-1 filed back in June: Cinderella's supervoting shares will turn into pumpkins in 5 years.
"Our Class A common stock and Class B common stock will automatically convert into a single class of common stock five years after the completion of this offering. Following the conversion, each share of common stock will have one vote per share and the rights of the holders of all outstanding common stock will be identical. This provision of our amended and restated certificate of incorporation may be amended only by the affirmative vote of the outstanding shares of the Class A common stock and the outstanding shares of the Class B common stock, each voting as a separate class. As a result of the automatic conversion, our founders will have identical rights as all other stockholders."
Photo by Jonathan_W.