Andreessen Speaks, We Agree

Sometimes we here at BALT get annoyed when observing leveraged buyouts and other actions by private equity firms and corporate raiders. We feel that the ultimate outcome often is neither productive or conducive to the long term health of a company (or its workers).

This goes the same for many sorts of "activists", who buy into a company and seek to push the company into hastily contrived actions that force immediate yet temporary upward blips in stock prices.

One method to avoid having one's company caught in the teeth of hungrier more aggressive (and blind eyed) souls, is to have a dual class stock structure, contravening the wisdom of Wall Street and others who feel that dual classes of stock are a bit...undemocratic.

We give a hearty "whatevs" to that, and will leave it to Marc Andreessen to explain why a dual class structure is important, given the right conditions. In his "In praise of dual-class stock structures for public companies" he states:

In practice, the world at large, the markets in which companies operate, and Wall Street in particular, throw up all kinds of short- and medium-term noise in the face of every public company, all the time.

and

The huge advantage of a dual-class stock structure is that it lets the company's core management simply ignore most of this stuff and stay focused on the long-term goal.

Of course in between those two quotes he gives a list of financial shenanigans and engineering that can cause a given company to get off the task of building a strong business for the long term.

But read it there, because he makes a lot of sense.