Zynga, Groupon Founders Strengthen Voting Power Ahead of Planned IPO
NEW YORK - The founders of social video gaming giant Zynga and online deal provider Groupon have boosted heir voting clout over regular shareholders ahead of their IPOs that are expected in the coming weeks, the Wall Street Journal reported.
It said their new extra-supervoting shares break new ground in terms of how many votes a share can carry and could set a new standard for how founders keep control over key issues after their companies go public.
At Zynga, which has done a slew of integration deals that helped promote movies, TV shows and musical talent, including Enrique Iglesias and Lady Gaga, over the past year, founder and CEO Mark Pincus will after the IPO own shares that carry 70 votes each, versus the typical shareholder's one vote per share, the Journal said, citing regulatory filings.
With those shares, Pincus controls 38 percent of the shareholder votes despite what is only a 20 percent economic stake, according to the Journal. Meanwhile, five venture capital investors have a combined 26 percent of the votes despite owning a 35 percent economic stake.
Pincus' added voting rights could give investors a chance to push the IPO price lower in meetings between management and investors that typically precede IPOs, experts told the Journal.
The paper said that Pincus negotiated his 70-vote stock in part because of an earlier experience as chairman and CEO of Support.com after its IPO in 2000. While he held 15 percent of the stock, venture capital firms owned 30 percent, and he left later that year, it quoted a source as saying.
Meanwhile, after Groupon goes public, its three founders will own shares that carry 150 votes each, according to the Journal, which cited the company's latest regulatory filings.
Groupon and Zynga declined to comment.