M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, July 19, 2021

Robinhood goes public

Robinhood just filed its S-1, proposing to raise $2 bn on a $35 bn valuation. Robinhood is continuing what has become de rigueur by now - a dual class structure that ensures the founders will control the company once it goes public. OK, I guess I'm board with that. I mean, it's definitely not the first time, and by now markets seem nonplussed by founder-led companies going public this way.  I won't quibble. But I don't understand is why Robinhood - like other founder-led companies with dual class stock - has opted for a classified board structure. I mean, what's that about. A classified board will obviously be necessary for purposes of preventing a takeover by combining it with a pill. But, this company has a dual-class structure. It's basically immune from a hostile takeover. It won't ever need a pill.

Then, there's this. They've entered into a Founder's Voting Agreement by which each of the founders agrees to vote for the other for the board: 

Founder Voting Agreement
In connection with this offering, our founders and certain of their respective related entities will enter into a voting agreement, which will become effective prior to the completion of this offering (the “Founder Voting Agreement”), to which we will also be a party. Pursuant to the Founder Voting Agreement, each founder and certain of their respective entities (including estate planning vehicles) party to the Founder Voting Agreement (the “Founder Affiliates”) will agree, upon the terms and subject to the conditions set forth therein, to, among other things, (i) vote all of the shares of our common stock held by such founder or Founder Affiliate for the election of each founder to, and against the removal of each founder from, our board of directors and (ii) vote together in the election of other directors generally, subject to deferring to the decision of the nominating and corporate governance committee in the event of any disagreement between the founders. In addition, under the Founder Voting Agreement, certain of the Founder Affiliates will grant, effective upon completion of this offering, to the other, unrelated founder, an irrevocable voting proxy with respect to shares of our common stock owned by such Founder Affiliate. Also pursuant to the Founder Voting Agreement, each founder will grant, effective upon such founder’s death or permanent and total disability, a voting proxy to the other founder with respect to shares of our common stock held by such founder and over which such founder was entitled to vote (or direct the voting of) immediately prior to such founder’s death or permanent and total disability. Moreover, the Founder Voting Agreement will grant to each founder and its respective Founder Affiliates a right of first offer in the event the other founder or any of its respective Founder Affiliates proposes to transfer any shares of Class B common stock in a transaction that would cause such shares of Class B common stock to convert to Class A common stock pursuant to our Charter. The Founder Voting Agreement will be in effect until the Final Conversion Date

 I guess that's prudent planning, since both of the founders together hold over 50% of the vote. This will ensure that they vote for each other, even if they no longer want to. Bound together until the bitter end.



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