The other comedy in US tech land – aside from Elon Musk’s realisation that Twitter isn’t worth $44bn – is happening at Meta, the restyled Facebook. The joke in that case is on the shareholders. Having hailed Mark Zuckerberg as a visionary, and having given him effective control on that basis through a form of “golden share” voting structure, investors were shocked to discover it is impossible to sack the boss when he pursues visions they do not 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 sell-off. The stock has fallen so far because Zuckerberg is squandering tens of billions of the company’s dollars on building his mysterious “metaverse” and appears determined to sink even more cash into the virtual reality black hole. Outside shareholders wish he’d 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 class of stock with super-charged rights. The wailing and gnashing of teeth is terrible to behold.
“If any other company had done this, you’d have activist investors writing letters, proposing alternative slates of directors, demanding change,” Jim Tierney of investment firm AllianceBernstein told the FT. To which one can only reply: weren’t you aware of the unequal voting setup when you bought the shares?
To US eyes, super-charged voting rights are par for the course, especially in media and tech land. They barely get mentioned when share prices are rising. Social media app Snap even managed to sell a class of stock with zero voting rights when it listed in 2017. The traditional UK perspective has been very different. Equal rights for equal economic risk has been the mantra here for several decades – and quite right, too.
In a bout of angst over the perceived dinosaur-like state of the London Stock Exchange – not enough tech companies, in other words – the UK did take one step in the US direction, it should be said. Lord Jonathan Hill’s review of the listing regime in 2020 recommended allowing founders to retain oversized voting powers while still qualifying for the “premium” status that gets a company into market indices. 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 irate investors would love a similar five-year sunset clause. Facebook listed in 2012, so equal voting rights would already be in place by now. Zuckerberg might still be obsessed with his underwhelming avatars, and equally convinced the gamble will come good eventually, but there would be a greater degree of accountability to other owners. He might have to reign in spending on his metaverse, rather than give shareholders a simple brush-off, which seems to be his current approach.
Those US investors, though, should reflect on their role in encouraging the cult of the genius founder. They bought the substandard stock, accepted the terms and didn’t insist on protections. It’s a bit late for regrets.
GSK shares on the mend despite post-Haleon setback
The summer demerger of Haleon, the Panadol-to-Sensodyne consumer products company, from GlaxoSmithKline is a success, both sides agree. It’s just that the shareholders have little to show for it. GSK, having been £18-ish when the demerger dawn beckoned, 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 are claiming their cancers are linked to Zantac and one analyst’s estimate that industry-wide damages, if awarded, could be anywhere up to £40bn has understandably created alarm, even if it’s impossible to tell what GSK’s share would be (it stopped selling the product in the over-the-counter form in 1998 and many other pharma firms 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’s frustrated, she’d have a right to be. The day job of reinventing GSK after a lost decade seems to be on track.
Revenue and profit forecasts were lifted on Wednesday for a second time in six months and a vaccine for a respiratory virus could be the most important new GSK product for years. Despite the share price, there is progress.