Neutered Securities

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Now that the clamor over Facebook’s public offerings has abated somewhat – both the purchasing scrum and the disappointment over the results – let’s look at this type of “ownership.” Facebook isn’t the first to offer what I call “neutered securities.” Carlisle is another high-profile offering. While different from Facebook in that it offers so-called partnership interests instead of outright nonvoting shares, it still strips the minority shareholders of their usual ownership rights to exercise participation in the company they purported “own.”

Of course, in reality, traditional stock ownership comes with only the illusion that you participate in the process through shareholder resolutions and annual meetings. I guess one could say that, at least with Facebook, you know what you’re getting. Whereas with, say, Exxon you think you’re an owner because that’s what the by-laws say and there is a process through which you can participate. You think that’s an element of value in your purchase but it isn’t. What is the difference between owning Facebook stock and Exxon stock? Facebook is putting the reality on the surface for all to see.

Still, this type of limited, stunted or neutered ownership is not what we should be working toward. I want to preserve the illusion that we’re owners with participation rights because then we can continue to work to claim those rights. Capitalism works best with informed and involved owners. Controlled by a few or controlled by all the owners? What do you want? See more in the video.