
The Shelf Life of John Mackey - troydavis
http://features.texasmonthly.com/editorial/shelf-life-john-mackey/
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Sujan
Very ELI5 question:

> When a company hits an extended rough patch and its stock price slides into
> a trough and stays there for a while, a special class of opportunistic
> investors—hedge funds and so-called activist investors like Jana
> Partners—stands ready to pounce. They buy up large chunks of the stock,
> enough to give them some bully power, and try to force the company to make
> changes that could increase the stock’s value, preferably quickly. That
> might mean selling the company, breaking it apart, forcing cost cuts,
> replacing leaders, or other often drastic measures. If the activists can
> rally other shareholders to join their cause, the company may have no choice
> but to acquiesce, at least to some degree.

Why does owning shares automatically mean having power over a company?

Is there no way to say "You buy shares, and the only right you acquire by it
is participating in share price increases and an optional dividend we decide
to pay or not"?

~~~
jasode
_> Is there no way to say "You buy [non-voting shares]"_

Yes, you can have multiple classes of shares[1], but the tradeoff is it makes
the shares less desirable for investors. This means the pricing of shares will
be lower (or possibly unsaleable) and you won't raise as much capital as you
intended. If you have a company considering an IPO, your investment banker
(e.g. Goldman Sachs, Credit Suisse, etc) will advise if the marketplace is
willing to buy your non-voting shares.

Facebook is an interesting example of having 3 classes of shares:

    
    
      Class A - 1 vote per share
      Class B - 10 votes per share (MZ holds these)
      Class C - 0 votes
    

Facebook did not issue Class C when they went public in 2012. The non-voting
shares were created in 2016.[2] Snap Inc on the other hand, issued non-voting
shares right at the IPO.

When you're a glamorous high-flying tech company, it's easier to entice
investors with the less-desirable non-voting shares. Could Whole Foods have
issued non-voting shares at IPO in 1992? They would have had to have agreement
from their investment bank to underwrite them and market interest from the
first wave of investors to buy them. You can't always have your cake
(significant capital funding) and eat it too (outside investors get 0 votes).

[1]
[http://www.investopedia.com/articles/fundamental/04/092204.a...](http://www.investopedia.com/articles/fundamental/04/092204.asp)

[2] [http://www.nasdaq.com/g00/article/facebook-shareholders-
appr...](http://www.nasdaq.com/g00/article/facebook-shareholders-approve-
creation-of-class-c-shares-cm638528)

------
losteverything
Texas monthly is one of those pubs that stands out.

It must be hell for mackey to lose/give everything.

The article is worth a read

~~~
chiph
They do terrific long-form reporting.

My guess is that he'll become an Amazon employee like Tony Hsieh did and
continue to run the business. At least until he finds something else he wants
to do more than that.

He'll get a windfall from the sale of course. And he'll probably start a
charitable foundation, or perhaps join another one (like the Bill & Melinda
Gates Foundation) and only keep his current $100mm to live on. Which is
"enough" for most purposes.

I've stopped by the new 365 store in Cedar Park (a suburb north of Austin) and
I find that it's less intimidating than the mothership at Lamar & 6th. I hope
the concept does well.

------
CaliforniaKarl
A prescient article. I hope this publication will be able to do a follow up
some time later, once things settle.

I also wonder: My understanding is that many recent tech IPOs are structured
such that most investors have limited ability to activist-invest in a company
(like what is happening with Whole Foods). Is that (at least partially)
because those CxOs have seen this happen before, and don't want it to happen
to them?

