Shopify Proposes CEO To Hold A Trump Card On Voting Power
Shopify Inc. (TSX: SHOP) is looking to preserve its CEO’s voting power with a proposal to launch a “founder share” that will effectively cement the chief officer’s 40% voting power. The firm announced this along with its 10-for-1 stock split proposal.
The e-commerce giant plans to authorize a new class of shares — a “founder share” — on top of its current Class A and supervoting Class B shares. The founder share, dedicated to Founder and CEO Tobi Lütke, will represent “a variable number of votes” that effectively gives the founder a 40% voting power when combined with the current shares he and his family beneficially own.
This proposal aims to “strengthen the foundation for long-term stewardship by Mr. Lütke, a proven leader who has delivered significant shareholder value.”
Lütke is expected to keep the founder share for as long as he is connected with the firm via an executive capacity, as part of the board, or as a consultant. But it is not transferable to his next of kin and he also stands to lose the founder share if he beneficially owns less than 30% of his current Class B shares.
Currently, Class B holds the majority of the voting power at 5`1%. But once the proposal is approved by the shareholders, Shopify Director John Phillips will also convert all Class B shares held by his Klister Credit to Class A.
Along with Lütke’s founder share, this effectively shifts the majority voting power to Class A shareholders at 59%.
The tech firm also announced a 10-for-1 stock split proposal for both Class A and Class B shares. The company said this “will make share ownership more accessible to all investors.”
Once the stock split proposal gets shareholder approval, shareholders on record will see their share count expand by a factor of ten.
After a 12.88% decline in stock price last week, itself following the unusual spike the week before, the company’s share price rose around 1.5% pre-market following the announcements. The unusual more than US$100-stock hike is currently being looked into by the New York Stock Exchange.
Shopify Inc. last traded at $757.98 on the TSX.
Information for this briefing was found via Sedar and Shopify. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.