Confirmation is a series of recent sales. On September 13, Jack Ma and Joe Tsai, co-founders of Chinese online giant Alibaba, announced their intention to sell their stake in the company for $ 4 billion by the end of 2018.
Nine days later, Mark Zuckerberg announced that he would get rid of Facebook shares of up to $ 13 billion by early 2019.
Jeff Bezos has cashed Amazon stock for $ 2 billion this year.
Pony Ma, head of Tencent, China’s telecommunications corporation (has no relationship with Jack), plans to sell $ 5 billion worth of shares.
Transactions account for up to a tenth of the total assets of these founders in their companies.
Tycoons go to cache
To see the consequences of selling or splitting stocks, consider six companies that are managed by their founders: Alibaba, Alphabet, Amazon, Facebook, Netflix, and Tesla. The median economic share of their founders is 13%. According to the current trajectory, this share will drop to 8% in five years.
Hi-tech moguls can go into cash even faster, notes The Economist, a British magazine.
Each company has its own structure, which reflects the preferences of its founder at an early stage and the amount of equity raised. But there are two main types of companies: those run by “control freaks”, and those run by “control fanatics”.
In paranoid companies, economic power and voting rights are combined.
As the founders sell their share, their legal power decreases. Netflix's Reed Hastings went the longest on this trail, reducing his stake from 7% in 2007 to 3%, but dominates Netflix because of his strong personality. This is impressive, but it is extremely vulnerable.
Amazon is also moving in that direction. The Bezos economic and voting package fell from 25% in 2007 to 16%. At this speed, the three main institutional investors will be able to get an advantage in the vote by the end of 2018. Elon Musk has 20% of the Tesla economic and voting package, but his share is also likely to decrease.
Mask's personal finances seem to have been reduced to a minimum: he took out loans secured by part of his shares.
These leaders become celebrities, and it's hard to imagine their company without them, as it was once hard to imagine Microsoft without Bill Gates. But in ten years, companies can go into institutional ownership, which has already happened with Apple and Microsoft.
Fanatics of control can lose a lot
The prospects for companies controlled by “fanatics of control,” the second category, are even darker. Their founders use double classes of shares or other mechanisms to preserve their voting rights even with a decrease in economic power. Alphabet has three classes of shares; Larry Page and Sergey Brin have 11% of the economic share, but 51% of the vote.
If they sell a large stake, as they did in the past, they will reduce their economic share to 6%, while maintaining a controlling stake.
Two classes of Facebook shares allow Mark Zuckerberg to have 51% of the vote and 14% of economic rights. This year, he considered a scheme for concentrating even more power in his hands, but refused this in September after a group of shareholders sued him.
Control fanatics are still relatively young and can run for as long as Warren Buffett and Rupert Murdoch have used a double class of shares to control for several decades.
But today's corporate executives have already crossed the red line. The gap between their economic and voting package is much wider than that of Buffett or Murdoch. And their companies are among the most important in the world.