Money Buzz 11/04
IPO options, retirement plans and more
Let's Make a Dual
If fear of losing control of your company is the only thing stopping you from an IPO, then dual-class ownership probably sounds like a great deal. In this public company ownership structure-which has gained exposure since Google announced plans to use it in its public offering-founders receive "supershare" stocks that carry multiple votes, while the shares sold to the public carry one vote each. Typically, a dual-share system is structured so the founders retain a majority voting power, thereby retaining operational control and insulating the firm from takeover attempts.
But control bears a hefty price tag. "The market places a real discount on firms like this," says Andrew Metrick, associate professor of finance at the University of Pennsylvania's Wharton School. "To retain control, you could be looking at a 20 to 30 percent lower valuation."
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