Lyft's dual-class stock structure ensures CEO John Green will retain control of the company.
According to Lyft’s founding myth, Logan Green, the ride-hailing app company’s 35-year-old co-founder and CEO, grew up often stalled in Southern California traffic, and thereby developed a fascination with transportation.
Green says Lyft—which has never turned a profit and lost $910 million on revenues of $2.2 billlion last year—is rapidly evolving and he wants to remain in control following its initial public offering, which is expected to raise up to $2 billion. As a holder of 60% of Lyft’s supervoting class-B shares, which were to be included in the IPO, he will have that power. The class-B shares are entitled to 20 votes each, versus a single vote per share for common stockholders. That will give Green and co-founder John Zimmer—who together own less than 8% of the company pre-IPO—just under 50% of effective voting power.
These dual-class stock structures are popular in Silicon Valley. They are also controversial, because they enable founders to push through decisions that may not serve other shareholders. Alphabet, Facebook and Snap—the latter sold shares with no voting rights at all—are some of the big names that used supervoting shares to insulate their founders from market pressure. Before the IPO, a group of pension funds, unions and asset managers urged Lyft to stick with a one-share, one-vote system, but were unsuccessful.
Lyft’s IPO has been controversial for other reasons, including a recent spate of suicides by drivers. In late March, unhappy drivers protested wage cuts outside a hotel where the company had scheduled an IPO road show.
Green, meanwhile, is dreaming of a transportation system with a few big networks of self-driving vehicles, according to a recent interview with CNN Money in San Francisco. Lyft will effectively park, service, clean, fuel and insure your ride, he predicted. As matters stand, he probably has the votes to give it a try.
And speaking of traffic jams, Lyft beat rival ride-hailing company Uber to market in what promises to be a busy season of tech IPOs.
