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Dual-Class Landscape Shifting for Tech Companies

October 11, 2018

​Fenwick securities co-chair James Evans talked to The Information about the growing trend of startup tech companies setting limits on founder power, partially as a response to investor and regulator feedback.

Evans noted that some startups have eliminated super-voting shares or have adopted time limits on dual-class stock—instituting rules where founders’ super-voting shares expire a set time after the company’s IPO. This contrasts with the typical approach of large startups over the past decade, which went public with multiple-class stock structures that gave founders wide control.

Evans told The Information that companies are putting more thought into how best to structure voting power. The struggles of tightly controlled companies have strengthened arguments against dual-class stock and regulators have also signaled support for limits on dual-class stock.

“Previously, it was almost sort of an automatic that you would implement dual-class,” Evans said. “The decision itself is much more carefully considered.”

The full article is available on The Information (subscription required).​​

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