Power to the Founder

Ecommerce company Shopify (SHOP) will seek shareholder approval for a “founder share” and a 10-for-1 stock split at its June 7 meeting. Founder shares refer to equity given to founders of the company. The move follows similar stock-split announcements this year by Tesla (TSLA), Alphabet (GOOGL), and Amazon (AMZN).

The plan aims to enhance the voting power of Shopify’s founder and CEO Tobi Lütke, who wants to safeguard his control of the company. The Canadian company, founded in 2006, offers a platform that facilitates online business sales.

Share Shuffle

The proposed non-transferable “founder shares” are meant to complement the existing share structure, which includes Class A and Class B shares. In support of Mr. Lütke, his mentor John Phillips plans to convert his “supervoting” Class B to Class A shares. Doing so will increase Mr. Lütke’s voting power.

If the founder shares are approved, Mr. Lütke would retain 40% voting control even if he sells his Class B shares, which have 10 times the voting power of each Class A share.

Shopify’s Wild Ride

Shopify stock has been on a wild ride in recent years. The company benefited from the pandemic-triggered lockdown. The stock’s price surged 300% from early 2020 to late 2021,, but this trend reversed as COVID restrictions eased. Shares have lost over 50% of their value this year.

Some market observers have criticized the company’s corporate governance structure, especially the compensation offered to the CEO in the form of millions of dollars’ worth of stock options. Still, the firm has gotten shareholder support in the past. It remains to be seen if Mr. Lütke’s wishes continue to be granted given the stock’s recently disappointing valuation.

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