Lyft is using a controversial new stock structure in its IPO that will let its founders keep 'significant influence' over the company

  • Lyft will have two classes of stock when it goes public this year, it said in documents filed Friday.
  • Class B shares, held by executives including the two founders, will have 20 votes while traditional Class A shares hawked to new investors will have one vote each.
  • Most tech companies that go public now are using a similar structure, and some organisations have pushed back against the growing trend.

There’s a growing trend among tech companies when they go public: keeping power in the hands of founders.

Lyft’s public filing of its S-1 document on Friday has proved no exception.

According to the prospectus, Lyft’s IPO will feature a dual-class share structure that gives founders Logan Green and John Zimmer “significant influence over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets.”

The document does not say the exact percentage of Class B stock – shares of which get 20 votes each compared to Class A’s one -but does show that the founders along with other executives also own about 27% of outstanding Class A stock.

According to a Wall Street Journal Report, the company is are working on a plan that would give them near-majority control of the app-based car ride firm after its initial public offering. A spokesperson for the company declined to comment on that report, citing a mandatory IPO quiet period.

It’s part of a growing – but controversial – trend

Until now, the practice has been rare. As Business Insider’s Troy Wolverton pointed out last week, Google and Facebook’s use of them was a rare exception years ago.

In 2004, when Google went public, for instance, it was one of just three tech companies and 13 firms overall that went public with a dual-class structure, according to data collected by Jay Ritter, a finance professor at the University of Florida. That year, 174 total companies had an IPO.

In the last two years, though, 13 tech firms hit public markets with dual-class structures, including Snap, Roku, Dropbox, and Spotify.

Essentially, the now common practice leaves retail investors with little say in how a company is run.

“The principle of one-share, one-vote is a foundation of good corporate governance and equitable treatment of investors,” Kenneth Bertsch, executive director of the Council of Institutional Investors, said in a letter to Lyft’s board of directors in February.

“CII believes public companies should provide all shareholders with voting rights proportional to their holdings.”

An earlier version of this post misquoted Lyft’s prospectus in the headline. It has been updated.

More from Lyft’s IPO filing:

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