The 10th Man

The Dumbest Thing on Wall Street

March 9, 2017

Snap, Inc. went public and sold stock to “investors” who were content, apparently, to be in possession of equity that didn’t have voting rights.

That’s right—Snap’s stock doesn’t vote. You probably heard that.

In a sense, this isn’t new. This tactic has been successfully used by media companies in the past; think Twenty-First Century Fox (NWS/A) and Viacom (VIA/B).

This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with this must-read report from Jared Dillian.

But the latest monkey business with voting rights doesn’t come from old-as-Methuselah media CEOs, but from Millennial tech CEOs. Alphabet (GOOG) has split its stock into voting and non-voting share classes, and Mark Zuckerberg owns super-voting shares of Facebook.

But Snap just issued stock that doesn’t vote. There is one vote, and it belongs to Evan Spiegel.

Evan Spiegel happens to be 26 years old, and he happens to be engaged to Victoria’s Secret model Miranda Kerr. Knowing myself at age 26, and knowing what I might have been like had I been engaged to Miranda Kerr, you can forgive me if I am implying that Spiegel might be a bit distracted.

Will Donald Trump succeed? Discover what top experts think - at SIC2017 - Register Now

None of these tech companies have a moat to begin with, and Snap’s is smaller than most. Instagram seems determined to put it out of business with its own “stories” feature, and it’s a known fact that Snapchat users just blaze through whatever ads they show anyway.

It also caters to the ficklest of fickle demographics, and any attempts to broaden Snapchat’s appeal have the potential to drive business to some other new, shiny platform. So there is that.

But if you own stock that doesn’t vote, do you really own stock?

I mean, pretend you own 10% of a company, but you have no say in how it is run. Do you really own it? Is it equity or debt? If you think about it, it’s kind of like a covenant-lite bond. A zero coupon, cov-lite perpetual.

Interestingly enough, some large institutional investors are lobbying the index providers (S&P and such) to keep SNAP out of the indexes, because the stock has no voting rights.

I agree with this, for a lot of reasons. Stock that doesn’t vote is a bad development in capitalism, for sure, and there are obvious benefits to being in an index (with everyone piling into index funds these days). So kicking SNAP out of the index for having non-voting shares will provide a strong disincentive to companies doing that in the future.

Never mind the fact that stock that doesn’t vote is not stock.

But the broader issue here is that indexing has totally screwed up corporate governance, because if you are XYX Company and 20% of your stock is owned by indexers, that’s 20% of the float you never have to worry about falling into the hands of an activist. And it’s 20% of the float that will probably vote with management pretty much all the time.

The passive managers have been pretty passive when it comes to corporate governance. That could change (I hope it doesn’t), but the net effect is that you have a lot fewer shareholders with the ability to agitate for change at the corporate level. Activist investing is out of favor, but it shouldn’t be.

In the case of Snap, you have a company that is in pretty clear need of adult supervision, but the CEO, Evan Spiegel, is accountable to no one. There are stakeholders—NBC Universal bought $500 million worth of stock, and Spiegel would be wise to listen to them, but if he doesn’t want to, he doesn’t have to.

I don’t think it’s a coincidence that everyone is crazy for non-voting stock with the S&P 500 at 2375. My guess is that if you dreamed up non-voting stock with the S&P at 666 (almost exactly eight years ago), you would have been laughed out of your own roadshow. Sign of the times.

All of this probably sounds like a little bit of sour grapes about this handsome, successful kid and his lingerie model fiancée. Not really. I wish the guy all the success in the world.

This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with The 5 ETF Trading Strategies You Should Know About Before Investing, from Jared Dillian.

I’m doubtful of the investment merits, but my real beef here is about the voting rights. It takes a certain amount of arrogance—we know better than you—to deny stockholders a say in the direction of the company. That is one of the things about going public: you have to give up control, in exchange for being able to get liquid. Evan Spiegel didn’t have to. Good for him, I guess.

It is like that old P.T. Barnum quote—there is a sucker born every minute.

Investing in the Age of Trump

I have something really cool for you.

Pretty soon, we’re going to have an online conference to “wargame” all the implications of a Trump presidency. We’ll be talking about tax, regulation, trade, and what this means for financial markets.

John Mauldin, of course, has his famous Rolodex that he’s tapping into for three great market thinkers, and I actually have a Rolodex of my own—I’ll be separately interviewing three capital markets participants, including a managing director in derivatives sales and the head of FX strategy from a well-known Wall Street firm.

We’ll be talking about the Fed, we’ll be talking volatility, and we’ll be talking macro.

This is a rare opportunity to listen to people who manage real risk on a daily basis, and how they are positioning themselves for the next four years. I hope you are as excited as I am.

The virtual conference will be available for viewing by mid-March. If you pre-order now, you’ll get the early-bird price.

Jared Dillian
Jared Dillian


Get Thought-Provoking Contrarian
Insights from Jared Dillian

Discuss This


We welcome your comments. Please comply with our Community Rules.


jack goldman

March 9, 2017, 2:32 p.m.

Fake economy, fake news, fake stocks, fake currency, and people who are counterfeiting their own fake score on Wall Street. After August 15th, 1971, America has been rapidly building a fake empire, based on fake quotas, globalism, technology, immigration, and counterfeit currency. The Dow was 995 US silver dollars in 1966 and is 995 US silver dollars in 2016 and today. It’s all fake, a fake bubble, fake nation, fake internet, fake government positions, and homosexual marriage is a fake marriage with no children. We have created a fake empire with fake currency. The internet is not real, it is fake. I can’t eat a picture of rice and beans on the internet. Snap chat is fake but sex with a Victoria Secrets model is very real, if only temporary. This is why elites are creating a fake world, to they can have free sex with babes. I have to protect myself by measuring the fake world in real silver dollars. Since 2,000 Dow is DOWN about 60% in real silver dollars but it us UP 60% in fake counterfeit currency. Liars requires believers. Sadly, elites believe their own lies.

Use of this content, the Mauldin Economics website, and related sites and applications is provided under the Mauldin Economics Terms & Conditions of Use.

Unauthorized Disclosure Prohibited

The information provided in this publication is private, privileged, and confidential information, licensed for your sole individual use as a subscriber. Mauldin Economics reserves all rights to the content of this publication and related materials. Forwarding, copying, disseminating, or distributing this report in whole or in part, including substantial quotation of any portion the publication or any release of specific investment recommendations, is strictly prohibited.
Participation in such activity is grounds for immediate termination of all subscriptions of registered subscribers deemed to be involved at Mauldin Economics’ sole discretion, may violate the copyright laws of the United States, and may subject the violator to legal prosecution. Mauldin Economics reserves the right to monitor the use of this publication without disclosure by any electronic means it deems necessary and may change those means without notice at any time. If you have received this publication and are not the intended subscriber, please contact


The Mauldin Economics website, Yield Shark, Thoughts from the Frontline, Patrick Cox’s Tech Digest, Outside the Box, Over My Shoulder, World Money Analyst, Street Freak, ETF 20/20, Just One Trade, Transformational Technology Alert, Rational Bear, The 10th Man, Connecting the Dots, This Week in Geopolitics, Stray Reflections, and Conversations are published by Mauldin Economics, LLC. Information contained in such publications is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become outdated and there is no obligation to update any such information. You are advised to discuss with your financial advisers your investment options and whether any investment is suitable for your specific needs prior to making any investments.
John Mauldin, Mauldin Economics, LLC and other entities in which he has an interest, employees, officers, family, and associates may from time to time have positions in the securities or commodities covered in these publications or web site. Corporate policies are in effect that attempt to avoid potential conflicts of interest and resolve conflicts of interest that do arise in a timely fashion.
Mauldin Economics, LLC reserves the right to cancel any subscription at any time, and if it does so it will promptly refund to the subscriber the amount of the subscription payment previously received relating to the remaining subscription period. Cancellation of a subscription may result from any unauthorized use or reproduction or rebroadcast of any Mauldin Economics publication or website, any infringement or misappropriation of Mauldin Economics, LLC’s proprietary rights, or any other reason determined in the sole discretion of Mauldin Economics, LLC.

Affiliate Notice

Mauldin Economics has affiliate agreements in place that may include fee sharing. If you have a website or newsletter and would like to be considered for inclusion in the Mauldin Economics affiliate program, please go to Likewise, from time to time Mauldin Economics may engage in affiliate programs offered by other companies, though corporate policy firmly dictates that such agreements will have no influence on any product or service recommendations, nor alter the pricing that would otherwise be available in absence of such an agreement. As always, it is important that you do your own due diligence before transacting any business with any firm, for any product or service.

© Copyright 2018 Mauldin Economics