The former CEO of Barnes & Noble and his family has been much in the news of late. It seems as if someone outside of the family — just an average Joe like you or me, only with apparent control of a fair sum of money — wishes to buy B&N stock, a lot of it. At present, the buyer is reported to own about 18% of the company’s stock. The bookseller has now adopted a policy whereby someone cannot buy more than 20% of the stock without the permission of the B&N board.
Does that strike you as horse puckey? It does me. Reason with me: If the former CEO and his family took the company public and used the proceeds of selling most of their stock to buy horse farms, mansions and Bentleys, retaining only 30-35% of the outstanding stock, who knows why — maybe advisors told them it would be unlikely that any one person or group could muster enough voting power to oust them from control — then the family should shoot the advisors. On the other hand, if they acquired the company by buying lots of publicly-owned stock….? I’m not interested enough to investigate how they acquired B&N, but someone should have told them that the only way to keep the company from falling into the hands of barbarians was to control 51% of the stock.
Owning a company is many things, but when one takes it public and controls less than 51% of the shares, majority interest is up for grabs. Owners take companies public in order to raise funds and grow, or to make liquid the years of work and sacrifice it took to build the outfit. Others buy much of the stock of publicly held companies to control them. In either event, 51% of the stock wins. If you don’t want to play the game, don’t sell more than 49% of the stock (or, if you buy public shares, don’t buy less than 51%, or the decimal equivalent of control, which could be — what? — 50.00001% of the shares or with even more zeros to the right of the decimal).