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Inside Private Tech Voting Structures

Medical testing company Theranos faces mounting questions about its technology. But founder Elizabeth Holmes may be insulated from investor pressure, thanks to a supervoting share structure that gives insiders 100 votes per share, compared to a single vote for every share held by everyone else, according to an analysis done by research firm PitchBook for The Information.

Theranos is typical of the most highly valued venture-backed private tech companies that have adopted supervoting shares, a separate class of stock typically used to give founders and other insiders enough voting power to control the firm regardless of how many shares they own.

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In the public markets, there are signs that investors have grown weary with supervoting shares. A shareholder proposal for News Corp to abandon its dual-class structure, which gives Rupert Murdoch control of the company despite owning only a minority of the overall shares, was defeated at this month’s shareholder meeting by a razor-thin margin: 50.5% of shares voted opposed the resolution, while 49.5% were in favor.

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Joe Lonsdale
Joe Lonsdale
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Chamath Palihapitiya
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Ruchi Sanghvi
VP Operations, Dropbox
Only an elite few have enough leverage over investors to introduce dual-classes of shares.