Somehow, this keeps happening.

A company goes public with a dual class share structure – 10 votes per share for insiders, 1 vote per share for the public, something like that. 

But the company pays its employees in stock, so it issues more 1-vote shares.  Then maybe the company wants to make stock acquisitions – and it issues still more 1-vote shares.  The insiders want to monetize some of their stock, so they convert their 10-vote shares to 1-vote shares and sell them.

Eventually, there is a risk that the insiders’ 10-vote shares will no longer represent a majority.

The board could, I suppose, issue more 10-vote shares to the founders, but even if the charter permits that, it creates difficult questions.  How much should the founders pay for that extra control?  What’s a good price for it? 

When this first happened, the company was Google, and their solution was to amend the charter to create a new class of no-vote shares that could be issued for acquisitions and so forth without diluting the founders’ control.  (It was also an interesting end-run around the exchange listing rules that prohibit disparately reducing or restricting the voting power of traded shares, because, if anything, issuing new no-vote shares enhanced the voting power of traded shares, relative to their economic stake in the company.)

But it prompted a lawsuit in Delaware, with shareholders arguing that the board and the founders breached their fiduciary duties to shareholders by creating a whole new class of stock to perpetuate the founders’ control.  That lawsuit settled for additional limits on how the no-vote shares would be issued, but in the end, Google got its no-vote Class C shares, which now trade alongside the 1-vote Class A shares.

Mark Zuckerberg was so impressed with Google’s plan that he tried the same thing at Facebook.  To stave off a shareholder lawsuit, he agreed to negotiate with an independent special committee – and the shareholders turned up evidence that independent committee member Marc Andreessen was texting Zuckerberg a play by play of committee deliberations and coaching him on how to negotiate.  Ultimately, Zuckerberg dropped the idea.

Next there was Snap.  Snap went public with a tri-class structure.  The public received no vote shares, while the founders had 10 votes per share, and the founders and other insiders had additional 1-vote shares.  The charter specified that when the founders died, or relinquished most of their 10-vote shares, all shares would convert to 1 vote per share.  But the founders wanted to give away stock to charity while maintaining control!  So they proposed charter amendments that changed the conditions under which the share class structure would collapse, such as, among other things, requiring a sell down of both the 10-vote shares and the 1-vote shares.  Shareholders sued, alleging that the charter amendments had the effect of changing the rights of the public no-vote shares, and therefore could not be effected without a separate vote of the public shareholders under DGCL 242. That case also settled when Snap withdrew the proposed amendments. 

There may be other similar examples but the latest entry in the genre concerns Cloudflare, which is now the subject of at least 3 pending complaints that will presumably be consolidated into a single case.  Fourth verse same as the first: The company went public with a dual class structure, whereby the founders had 10 votes per share and the public had 1 vote per share; the charter provided that when the founders’ holdings of 10-vote shares dropped below a certain threshold, everything became 1-vote per share; the founders eventually got antsy about that bargain and proposed a recapitalization.  After the founders got independent special committee approval, the board proposed charter amendments that create a new class of no-vote shares, and a new class of golden shares with no economic rights but that have 9 votes per share.  All shareholders – public and insiders alike – get what is essentially a dividend of 1 no-vote share per outstanding share.  Then, the founders exchange each 10-vote share for one 1-vote share plus 1 golden share.  Meaning, the founders end up with golden shares to maintain control, and monetizable 1-vote and no-vote shares, though if the founders sell enough of their 1-vote stake, the share structure collapses into a single class.  There are also certain conditions involving the founders remaining with the company, and so forth.

Obviously, the public shareholders are claiming this is a breach of fiduciary duty and a transfer of control rights from the public to the founders, but here’s the thing.

We all remember (boy do we remember) the dust-up in Delaware about revising DGCL 144 to make it easier for controllers cleanse conflict transactions, right?

Well, new DGCL 144 has a carveout: its cleansing procedures do not

Limit judicial review for purposes of injunctive relief of provisions or devices designed or intended to deter, delay, or preclude a change of control or other transaction involving the corporation or a change in the composition of the board of directors;

The most obvious application of that carveout was for activist situations, but the plaintiffs are arguing that because Cloudflare is also a case about a provision or device “designed or intended to deter, delay, or preclude a change of control,” the new cleansing procedures do not apply, and we are back in MFW land.

For those who want to keep track of all this, the case numbers are 2026-0772, 2026-0763, and 2026-0734, and it looks like VC Laster caught them.

In any event, I assume founders have now learned their lessons and these scenarios will eventually fade from view; SpaceX, for example, is going public with an authorized class of no-vote shares in its charter, which presumably will be used for acquisitions and whatnot, so that Musk’s voting power does not have to be diluted with new issuances of 1-vote shares.

So as long as we’re talking about semi-annual vs quarterly reporting – It has long been observed that the disclosure obligations of the federal securities laws function as sub rosa substantive governance regulation. The obligation to report necessarily carries with it an obligation of oversight; you can’t report what you don’t know.

Thus, a switch to semi-annual reporting may not simply mean less information to investors; it loosens the obligations of boards, and managers, to oversee the company. 

A new paper by Anne Tucker and Timothy Lytton demonstrates this point in the context of mutual fund disclosures.  After interviewing a variety of market players, including investment advisers, fund managers, compliance officers, and fund counsel, they conclude that it’s less important whether anyone reads the disclosures than the fact that the process of drafting them triggers legal and professional norms which end up substantively shaping mutual fund products.

We can extend the reasoning to the SEC’s announcement that it would pull back on enforcement over things like “retention of books and records, that consumed excessive Commission resources not commensurate with any measure of investor harm.”

Sure, maybe each individual violation doesn’t result in investor harm, but when companies know the “small” stuff won’t be sweated, they don’t build out the compliance capacity that’s necessary to catch the big stuff. (Unrelated: After replacing multiple general counsels at Tesla, Elon Musk has apparently abandoned the concept at SpaceX.)

Unfortunately, though – if the SEC does permit semi-annual reporting – there’s not a lot anyone can do to challenge it.  When the SEC adopts new regulations, the regulated entities can sue, claiming that the regulation was irrational or otherwise improper.  When it repeals them, though, it’s hard to imagine who would have standing to bring a claim, no matter how irrational the process.

There is no other thing.  No new Shareholder Primacy podcast this week; back soon!

The pace of announcements has slowed a bit since the last update. My list now has 36 entries, five more since the last update. We have also had some significant vote results come in.

Here is an updated sheet with everything I’ve collected so far. I’ve also had Claude generate some graphics.

Origin & Destination

Although I’ve been looking closely at the companies coming to Nevada or Texas to understand trends, I hadn’t closely looked at the companies going to Delaware to see if I could discern any patterns yet. The five companies picking Delaware so far this year are:

• LQR House (NV –> DE)
• Cheetah Net (NC –> DE)
• EQV Ventures (Cayman –> DE)
• Haymaker Acquisition Corp. 4 (Cayman –> DE)
• NL Industries (NJ –> DE)

EQV Ventures and Haymaker are both de-SPACs from the Caymans to Delaware. I haven’t excluded them from the data set at this point, but if you put them to the side, we’re looking at 34 reincorporations with Texas at 15, Nevada at 12, and Delaware at 3, and the Caymans at 3.

Movement Over Time

This is a neat visualization. The first four announcements in the dataset are all late 2025 with votes happening in 2026.

Different Visualization on Origin & Destination

This visualization captures a big difference between Texas and Nevada. Texas has been picking up corporations from different places while Nevada has only picked up companies leaving Delaware.

Redomiciliation Count vs. Market Cap

This is another fun comparison. Texas and Nevada have the bulk of the movement and the money in terms of rough market cap. Of course, Exxon and Dell account for over 85% of the overall market cap here. Exxon is just a big one.

Approval Margins

Here, the approval margins are calculated as votes in favor as a percentage of votes cast. This chart does not include the moves via written consent.

I can refine my numbers after this for the next update. In contrast to my little chart here, Exxon’s 8-K shows Exxon as having secured 71.2% of the vote and this chart shows them at 61%. The difference is because Exxon calculated the percentage of votes in favor vs. against–as it should have. At the time, Exxon was a New Jersey corporation and New Jersey’s law runs on votes actually cast at a meeting. Delaware runs off of a majority of the outstanding equity so it’s going to be a higher hurdle.

How you calculate these percentages changes how we see what’s happening. My chart lumps abstentions and broker non votes together even though many companies break them out separately. I’m going to need to go back and update the chart to include total equity outstanding as a separate column after this.

Submissions are now open for the 2026-27 series of the online Law & Finance Workshop. Submissions are due by the end of the day on Friday, July 3, 2026.

The Law & Finance Workshop was launched in Spring 2025 to create a space for more frequent discussion of scholarly works-in-progress in the field of law and finance, and to foster community among scholars working in this area. The workshop meets online once per month during the fall and spring semesters and is open to all interested scholars. Each workshop features a paper presentation followed by comments from a discussant and Q&A with participants. 

We welcome submissions from scholars across all relevant disciplines that examine the role of law and regulation in finance broadly defined, including household finance, corporate finance, and public finance. Interested scholars should submit their abstracts using this form no later than EOD onFriday, July 3, 2026. Selected authors must be ready to make complete drafts of their papers available for distribution one week prior to the scheduled date of the workshop.  

We look forward to seeing you in the fall.

Nikita Aggarwal, Caroline Bradley, & George Georgiev (organizing committee)

No not that one.

I speak of the proposed redomestication of Natural Gas Corporation from Colorado to Texas. As Bloomberg reported, ISS recommended in favor of the move, even though it had recommended against Exxon’s move, which prompted accusations of opacity.

(Exxon, ludicrously, argued that Glass Lewis and ISS objected to its move because of their litigation over Texas’s proxy advisor law, conveniently ignoring that well before Texas moved to insulate corporate managers and instigated its war on proxy advisors, Glass Lewis objected to Tesla’s move, and ISS only tentatively recommended in favor, specifically on the understanding that Texas’s legal protections for shareholders were, at that time, comparable to Delaware’s. Also, I note, under Texas law – currently on hold on First Amendment grounds – merely for recommending a vote against management based on governance considerations, Glass Lewis and ISS would have had to announce publicly that they do not provide advice solely in the financial interests of shareholders and notify Ken Paxton of their recommendation.)

Anyhoo, ISS’s change of heart for Natural Gas is interesting and worth unpacking. Natural Gas Corporation currently has a staggered board, which can only be destaggered by an overwhelming vote of 80% of outstanding shares – an extremely high threshold that is difficult to meet in a public company. Directors can only be removed for cause, again with an 80% vote, and this provision, too, can only be eliminated with an 80% vote. But, when corporate law closes a door, some way it opens a window, and in this case, that window is, nothing in the charter or bylaws of Natural Gas Corporation require a supermajority to convert into a different entity: a conversion can occur by a simple majority vote. Of course, a conversion requires new organizational documents, which are treated as part of the plan of conversion. So, Natural Gas Corp proposes to convert to a Texas entity, and the new Texas organizational documents will remove the stagger, remove the supermajority vote requirements, and permit shareholders to remove directors with or without cause by a simple majority vote.

Natural Gas’s board is not proposing to adopt Texas’s opt-in limits on derivative litigation (i.e., to require the plaintiff to hold 3% of shares), or Texas’s limits on shareholder proposals (3% or $1 million holding requirement), but it isn’t – as ArcBest did – promising to never unilaterally adopt these provisions in the future. And, of course, Natural Gas’s board will automatically reap the benefit of Texas’s high threshold for insider liability, namely, a showing of “fraud, intentional misconduct, an ultra vires act or a knowing violation of law.”

Given the givens, ISS concluded that benefits to shareholders of the improved governance structure were worth the loss of other rights, which seems an entirely reasonable conclusion.

That said, it is worth noting that Natural Gas could have achieved the same benefits to shareholders by reincorporating to Delaware, and it certainly could have committed in its charter to never adopt Texas’s optional holding requirements for proposals and litigation. By choosing Texas, the board is offering shareholders a cynical trade: we’ll enhance your voting power in exchange for greater insulation from liability.

And another thing. New Shareholder Primacy podcast is up!  Me and Mike Levin talk about, naturally, the SpaceX S-1. Here at Spotify; here at Apple; and here at YouTube.

And still another thing. In connection with the release of his book, Corporate Power and the Politics of Change, Rutgers law professor Matteo Gatti is hosting a series of podcasts with corporate law professors exploring the book’s themes. Matteo was kind enough to invite me to participate; there are also – or will be soon – episodes with Stephen Bainbridge, Jill Fisch, Swarnodeep Homroy, Elisabeth Kempf, Katharina Pistor, Mark Roe, Veronica Root Martinez, Roy Shapira, Tim Smith, and Reilly Steel.

The Insurance, Legal Studies and Real Estate Department in the Terry College of Business at The University of Georgia invites applications for a tenure-track Assistant Professor position. The position will begin fall semester of 2027, with an anticipated employment start date of August 1, 2027.

More information about the the opportunity can be found here.