An IPO like no other: USC experts look at Snap and its future

USC experts in technology, finance, law and media discuss the big “coming out party” this week for Snapchat’s parent company, Venice’s own Snap Inc.

Can Snapchat anchor the next generation of L.A. startups?

“Snap’s IPO is a landmark for L.A. in its reinvention as Silicon Beach and as Los Angeles regrouped from the financial crisis of 2008. While the IPO will bring an influx of capital into L.A. as early employees cash out, the real question is if this can anchor the next generation of startups.

“Will Snap executives leave and start their own companies, forming a local new-economy mafia; and will this activity attract new venture capital to Los Angeles? Snap’s IPO is not just a happy ending for the company, but the first chapter for the reinvented city.”

ANDREA BELZ
Vice dean for technology innovation and entrepreneurship at the USC Viterbi School of Engineering

When shareholders don’t have a vote

“In general, I do not think that companies that go public should issue non-voting stock [as Snap is doing]. The idea that shareholders have the right to vote on the composition of a corporation’s Board of Directors is fundamental to the structure of the corporate entity.

“Traditionally, the ‘price’ of going public is that the corporation now has many new shareholders who will have a voice on the composition of the corporation’s Board. In the past there have been companies that have gone public and have granted limited voting rights to the new shareholders. The most notable recent examples are Facebook and Google.

“It feels to me like the founders want to have their cake and eat it too – reaping the benefits of being public without providing a voice to new shareholders. Investors must keep in mind that not only will individual investors not have a vote, but all IPO investors collectively will be unable to vote. My sense is that at least some in the market share my concerns and are not interested in purchasing shares in Snap or in any company that wants money from investors without giving them a voice.”

MICHAEL CHASLOW
Professor at the USC Gould School of Law and director of the USC Small Business Clinic

Snapchat’s biggest accomplishment has been creating its own language

“The numbers alone don’t tell the story of Snap’s grip on its users. The user experience is powerful, it has its own vocabulary, its own visual language. Any platform that can already command that type of cultural sway can leave a deep mark.”

GABRIEL KAHN
Professor at the USC Annenberg School for Communication and Journalism and director of the Future of Journalism at the Annenberg Innovation Lab