TechCentralTechCentral
    Facebook Twitter YouTube LinkedIn
    Facebook Twitter LinkedIn YouTube
    TechCentral TechCentral
    NEWSLETTER
    • News

      Saboteurs threaten South Africa’s power supply

      20 May 2022

      Prosus to sell Russia’s Avito

      20 May 2022

      Curro pilots artificial intelligence for learning in its schools

      20 May 2022

      Dark weekend lies ahead thanks to you know who

      20 May 2022

      CSIR develops app to help kids learn to read

      20 May 2022
    • World

      Chip giant ASML places big bets on a tiny future

      20 May 2022

      Musk moves to soothe investor fears over Tesla

      20 May 2022

      Apple is almost ready to show off its mixed-reality headset

      20 May 2022

      TikTok plans big push into gaming

      19 May 2022

      Musk says he will vote Republican, calls ESG a ‘scam’

      19 May 2022
    • In-depth

      Elon Musk is becoming like Henry Ford – and that’s not a good thing

      17 May 2022

      Stablecoins wend wobbly way into the unknown

      17 May 2022

      The standard model of particle physics may be broken

      11 May 2022

      Meet Jared Birchall, Elon Musk’s personal ‘fixer’

      6 May 2022

      Twitter takeover was brash and fast, with Musk calling the shots

      26 April 2022
    • Podcasts

      Dean Broadley on why product design at Yoco is an evolving art

      18 May 2022

      Everything PC S01E02 – ‘AMD: Ryzen from the dead – part 2’

      17 May 2022

      Everything PC S01E01 – ‘AMD: Ryzen from the dead – part 1’

      10 May 2022

      Llew Claasen on how exchange controls are harming SA tech start-ups

      2 May 2022

      The inside scoop on OVEX’s big expansion plans

      20 April 2022
    • Opinion

      A proposed solution to crypto’s stablecoin problem

      19 May 2022

      From spectrum to roads, why fixing SA’s problems is an uphill battle

      19 April 2022

      How AI is being deployed in the fight against cybercriminals

      8 April 2022

      Cash is still king … but not for much longer

      31 March 2022

      Icasa on the role of TV white spaces and dynamic spectrum access

      31 March 2022
    • Company Hubs
      • 1-grid
      • Altron Document Solutions
      • Amplitude
      • Atvance Intellect
      • Axiz
      • BOATech
      • CallMiner
      • Digital Generation
      • E4
      • ESET
      • Euphoria Telecom
      • IBM
      • Kyocera Document Solutions
      • Microsoft
      • Nutanix
      • One Trust
      • Pinnacle
      • Skybox Security
      • SkyWire
      • Tarsus on Demand
      • Videri Digital
      • Zendesk
    • Sections
      • Banking
      • Broadcasting and Media
      • Cloud computing
      • Consumer electronics
      • Cryptocurrencies
      • Education and skills
      • Energy
      • Fintech
      • Information security
      • Internet and connectivity
      • Internet of Things
      • Investment
      • IT services
      • Motoring and transport
      • Public sector
      • Science
      • Social media
      • Talent and leadership
      • Telecoms
    • Advertise
    TechCentralTechCentral
    Home»World»How Zuck wrested control of Facebook from shareholders

    How Zuck wrested control of Facebook from shareholders

    World By Editor2 February 2012
    Facebook Twitter LinkedIn WhatsApp Telegram Email
    Mark Zuckerberg

    Mark Zuckerberg controls a majority of Facebook’s voting rights, and will continue to enjoy that control after it goes public, according to an unusual arrangement he struck with some key investors and colleagues among Facebook’s shareholders.

    A string of voting arrangements outlined in Facebook’s Securities and Exchange Commission filing show that some of the company’s most powerful shareholders have ceded their voting rights to Zuckerberg, the company’s chief executive. While Zuckerberg only owns 28,2% of the Facebook’s shares, the additional “shares subject to voting proxy” gives him an additional 30,6% of the voting power, leaving him with a total of 56,9% of the shareholder voting power. That gives Zuckerberg full control of the company’s decision making.

    Under the arrangement, Dustin Moscovitz, Sean Parker and a host of other Silicon Valley bigwigs have given Zuckerberg “irrevocable proxy” to control their votes. That means that their shares will swing with his shares.

    Zuckerberg also has irrevocable control over shares held by DST, Greylock, Accel Partners and other major firms and investors — and the voting rights that go along with those shares — in most circumstances.

    “This is not common at all,” said Menlo Ventures partner Mark Siegel, who has monitored quite a few IPOs in his time in Silicon Valley and spoke to VentureBeat by phone today.

    “He negotiated a very unique deal,” said Siegel of Zuckerberg’s coup. While no one knows exactly why Moscovitz, Parker and a slew of high-powered venture capital firms would have given up their votes, Siegel speculated, “I’m sure there’s a point where shares were offered with that as a contingency.”

    In other words, this may have been a quid-pro-quo trade of money (shares) for power (votes).

    And maintaining power is something that Zuckerberg has focused on since Facebook’s inception.

    “To give Mark and Sheryl their due, it looks brilliant having turned down those earlier offers,” said Siegel, referring to a past multibillion-dollar acquisition offer from Yahoo. “I think they understood before a lot of us did what the potential of the company was… Staying independent and private was a pretty smart move.”

    Now, Zuckerberg will continue to exert his control over the publicly traded company; with his block of votes, he will have more sway in important decisions such as changes to the board, mergers, or splitting up parts of the company.

    “Every company puts in place things like a poison pill, things that make it possible for dissenting shareholders to prevent a hostile takeover,” said Siegel. “Presumably [the voting arragement] puts more of that control in one individual’s hands … it concentrates a lot of traditional protections.”

    Separately, a special “class B” of shares has let Zuckerberg and a small group of executives and employees at Facebook exert more control than they otherwise would by giving them 10 times the number of votes per share than “Class A” shares. Class A shares are the ones public investors will get.

    This will also give Zuckerberg the ability to maintain control of Facebook even if some of his proxy friends decide to sell their shares. That’s because, under the rules of Facebook stock, those class B shares, if sold, automatically get converted to class A. Thus, people buying from the special proxy share owners will only get class A shares with only one vote per share. Zuckerberg is thus left a greater majority of the powerful class B shares, and thus will be more able to maintain control overall.

    So, except for unforeseen edge cases, Zuckerberg will maintain control of a huge block of Facebook shares (and votes) until he dies or divests. But as far as Facebook is concerned, Moscovitz, Parker, DST and others don’t constitute a group because they’re not voting together — Zuckerberg is voting for them.  — Jolie O’Dell, VentureBeat

    • Image: Jolie O’Dell, VentureBeat
    • Subscribe to our free daily newsletter
    • Follow us on Twitter or on Google+ or on Facebook
    • Visit our sister website, SportsCentral (still in beta)
    Accel Partners DST Dustin Moscovitz Facebook Greylock Mark Zuckerberg Sean Parker
    Share. Facebook Twitter LinkedIn WhatsApp Telegram Email
    Previous ArticleShinn is new shadow communications minister
    Next Article How SA start-up wants to ‘reinvent search’

    Related Posts

    Chip giant ASML places big bets on a tiny future

    20 May 2022

    Musk moves to soothe investor fears over Tesla

    20 May 2022

    Apple is almost ready to show off its mixed-reality headset

    20 May 2022
    Add A Comment

    Comments are closed.

    Promoted

    Fast-rising fintech Bankingly closes $11m investment round

    20 May 2022

    Creating an effective employer value proposition for the new era of work

    20 May 2022

    Why fibre is the new utility – and what it means for South Africa

    19 May 2022
    Opinion

    A proposed solution to crypto’s stablecoin problem

    19 May 2022

    From spectrum to roads, why fixing SA’s problems is an uphill battle

    19 April 2022

    How AI is being deployed in the fight against cybercriminals

    8 April 2022

    Subscribe to Updates

    Get the best South African technology news and analysis delivered to your e-mail inbox every morning.

    © 2009 - 2022 NewsCentral Media

    Type above and press Enter to search. Press Esc to cancel.