TThe other comedy in US techland — aside from Elon Musk’s realization that Twitter isn’t worth $44 billion — happens at Meta, the restyled Facebook. In that case, the joke is on the shareholders. After hailing Mark Zuckerberg as a visionary, and having given him effective control based on a form of “golden share” voting structure, investors were shocked to discover that it is impossible to fire the boss when he pursues visions they don’t like
Meta’s share price is down 73% this year to its lowest level since 2015 for reasons that go beyond the general big tech selloff. The stock has fallen so far as Zuckerberg squanders tens of billions of the company’s dollars building his mysterious “metaverse” and seems determined to sink even more money into the black hole of virtual reality. Outside shareholders wish he would stick to the safer game of flogging advertising space.
Their problem is that they have no mechanism to force Zuckerberg to change direction. The founder owns only 13% of Meta’s shares but controls 54% of the votes thanks to a concentration in a share class with overloaded rights. The roaring and gnashing of teeth is terrible to behold.
“If any other company had done this, you’d have activist investors writing letters, suggesting alternative boards and demanding change,” Jim Tierney of investment firm AllianceBernstein told the FT. To which one can only answer: were you not aware of the unequal voting when you bought the shares?
To American eyes, supercharged voting rights are par for the course, especially in media and tech land. They are barely mentioned when stock prices rise. Social media app Snap even managed to sell a zero-voting share class when it listed in 2017. The traditional British perspective has been very different. Equal rights for equal financial risk has been the mantra here for decades – and rightly so.
In a fit of anxiety over the perceived dinosaur-like state of the London Stock Exchange – not enough tech companies, in other words – Britain took a step in the direction of the US, so to speak. Lord Jonathan Hill’s review of the listing regime in 2020 recommended allowing founders to retain outsized voting rights while qualifying for the “premium” status that gets a company into the market index. But the qualification was the important bit: the dual class structure would have to evaporate after five years. It was a classic fudge but a sensible one.
Meta’s angry investors would love a similar five-year sunset clause. Facebook went public in 2012, so equal voting rights would already be in place by now. Zuckerberg may still be obsessed with his underwhelming avatars, and just as confident that the game will be good eventually, but there would be a greater degree of accountability to other owners. He may have to reign in the spending of his metaverse, rather than giving shareholders a simple brush-off, which seems to be his current approach.
However, these American investors should reflect on their role in encouraging the cult of the genius founder. They bought the inferior stock, accepted the terms and did not insist on protection. It’s a little late for regrets.
GSK shares on the mend despite setback after Haleon
The summer split of Haleon, the Panadol-to-Sensodyne consumer products company, from GlaxoSmithKline is a success, both sides agree. It’s just that shareholders have little to show for it. GSK, after being £18-ish when the split dawned, is now £14.45.
The explanation is investors’ sudden panic over litigation in the US related to Zantac, an old Glaxo heartburn drug from the 1980s. Thousands of plaintiffs claiming their cancers are linked to Zantac and one analyst’s estimate that industry-wide damages, if awarded, could be anywhere up to £40 billion have understandably raised concerns, although it is impossible to say what GSK’s share would be (it stopped selling the product in over-the-counter form in 1998 and many other drug companies held the rights thereafter).
GSK has set aside £45m for legal fees and its chief executive, Dame Emma Walmsley, said the company would “vigorously” defend the claims, which is about all she can say at this stage. If she is frustrated, she would have a right to be. The day job of reinventing GSK after a lost decade appears to be on track.
Revenue and profit forecasts were lifted on Wednesday for the second time in six months and a vaccine against a respiratory virus could be the most important new GSK product for years. Despite the share price, there is progress.
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