Unsurprisingly, Facebook Inc (NASDAQ:FB) shareholders voted to adopt the proposed stock split plan that creates a new class of shares. The new share class structure will enable Founder and CEO Mark Zuckerberg to keep control of the company even as he donates shares to various charities. As he already had majority control of the company, it comes as no surprise that the proposal passed because of course he’s going to vote for himself to keep control.
Zuckerberg votes for himself
While the vote is totally legal, this seems like a scenario in which Zuckerberg shouldn’t have been able to vote on this proposal because it benefits him directly. Although legally it isn’t the same thing, it’s almost like a board member voting to give himself a raise or voting for himself to be re-elected to the board. However, this sort of thing happens on Wall Street all the time, so Facebook Inc (NASDAQ:FB) shareholders who didn’t abandon ship before Monday’s meeting now face a big question. They must decide whether they’re comfortable owning stock in a company they have absolutely no say in how it’s run.
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Of course history shows us that there are plenty of shareholders who just want winners in the portfolio and care nothing about being able to have a vote that means something. After all, Google parent Alphabet is still one of Wall Street’s favorite stocks, even years after the company adopted a share class structure that’s similar to what Facebook just officially adopted this week.
How will Facebook’s (FB) split affect investors?
Bloomberg‘s Sarah Frier explained that Facebook sees the long-term as being the most important thing right now and wants its chief executive to also be focused on the long-term. But keeping Zuckerberg in control of Facebook until he leaves the company is a double-edged sword. The social network may be killing it right now, but she explained that he remains in control even if the other shareholders become unhappy because he invests too much in “far-fetched things like artificial intelligence and virtual reality.”
It’s possible that Facebook Inc (NASDAQ:FB)’s shareholder base will shift a bit because some institutional investors are restricted from being able to invest in companies that have a leader with majority voting control. However, because Zuckerberg already held about 60% of the voting power for the social network before Monday’s shareholder vote, it’s unlikely any investors with such restrictions have a position in it. The vote was about cementing the founder’s control for the long-term rather than actually granting him control because he already had it.
Further, the social network was recently found to be the 14th most widely-held stock among institutions, and such a high degree of popularity is unable to change quickly.
Where will Facebook (FB) stock go next?
Facebook Inc (NASDAQ:FB) stock climbed by as much as 1% to $114.49 per share on Tuesday, the day after the company’s annual meeting. However, a technical analyst warns that the decline in Alphabet’s stock price could signal an impending decline for Facebook as well. Over the last week, shares of Google’s parent have declined by almost 4%.
Carter Worth, a technical analyst at Cornerstone Macro, told CNBC on Friday that stock charts suggest that Facebook shares will follow in the footsteps of Microsoft and Alphabet, both of which have declined recently. He thinks the social network’s stock could decline to $98 per share, which would still keep it in a bullish trend. Of note, recently notorious short-seller Citron Research said that Facebook Inc (NASDAQ:FB) is too expensive and should be shorted.