There are many risks tied to the Snapchat initial public offering. User growth is slowing. The company is still losing money. Facebook's Instagram is doing its best to kill it.
But the biggest problem with the IPO of Snapchat parent company Snap (SNAP) is the fact that any investor who buys the stock will have absolutely no say in how the company is run. The shares being sold on the New York Stock Exchange have no voting rights.
This is the first risk listed (among many) in the company's paperwork with the SEC when it first filed to sell stock.
Holders of Class A common stock have no voting rights. As a result, holders of Class A common stock will not have any ability to influence stockholder decisions.
Usually when an investor buys a share of a company, that ownership allows you to vote at the company's annual shareholder meeting.
Sure, your vote may not count all that much when compared to the company's insiders and big mutual and hedge funds that own most of the stock. But at least you have some say.
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Setting up multiple classes of shares is common for public companies. It lets founders and other executives exert more control. That's the case at Facebook (FB) and Google parent company Alphabet (GOOGL), for example
But while Mark Zuckerberg's stock does have super-voting rights, average shareholders still get a say as well. The same is true at Google. Individual investors get a vote, albeit not one that counts as much as founders Larry Page and Sergey Brin.
Facebook and Google also have so-called "adult supervision" -- seasoned executives like Facebook COO (and ex-Googler) Sheryl Sandberg and Alphabet chairman Eric Schmidt -- to help lead those companies.
There is no Sandberg- or Schmidt-like figure at Snapchat though. If you buy the stock, you are putting your faith almost entirely in its young CEO Evan Spiegel and co-founder Bobby Murphy.
Many investors who are looking to buy Snap's publicly traded stock may not be too concerned about the lack of a shareholder vote. Heck, the stock went up more than 50% once it started trading.
"The thesis for many tech companies is that if they don't get hassled, they could do more long-term planning. That's great if you can get away with it," said Duncan Davidson, general partner with Bullpen Capital, an early stage VC firm.
But Davidson said these tech companies are doing their investors a disservice by not allowing average shareholders a vote. It also eliminates the possibility of an activist coming in to try and shake things up when a company is not performing well.
Related: How going public may change Snapchat
Activists like Carl Icahn and Bill Ackman can get a bad rep. But they often do help to fix problem companies and oust CEOs when a company is underperforming.
Davidson added that a tech company can also still find a way to give investors a say and continue to focus on the long-term.
He brings up the example of Apple (AAPL) -- which had to fend with Icahn a few years ago -- as a company that has thrived even though it lacks multiple classes of shares.
And not every founder-led tech company turns out to be Facebook or Google. GoPro (GPRO), Zynga (ZNGA) and Groupon (GRPN) are examples of once-hot startups that have done terribly since going public. Their founders all had super-voting rights.
Ross Gerber, CEO of investment management firm Gerber Kawasaki, said on CNNI's CNNMoney show Thursday that average investors should steer clear of Snap for several months -- and that the lack of shareholder voting rights was a key reason.
Gerber said his firm is not investing in Snap. In some respects, the lack of any shareholder rights makes the stock similar to the tracking stocks that many companies set up in the late 1990s for tech divisions.
Tracking stocks were shares that "tracked" the performance of a specific subsidiary or unit of a larger firm. They had no voting rights and were mainly sold as a way to capitalize on the euphoria for all things tech before the Nasdaq bubble burst.
Related: Should Millennials buy Snapchat stock?
Disney (DIS) had a tracking stock for its old Go.com Internet unit. Investment bank DLJ -- which was later bought by Credit Suisse (CS) -- had a tracking stock for its online brokerage unit. AT&T (T) and Sprint (S) both set up tracking stocks for their wireless divisions too.
Those stocks were all subsequently brought back into the fold of the larger parent companies. (AT&T, by the way, is in the process of buying CNNMoney parent Time Warner (TWX).)
So can Snap get away with having a stock that doesn't let people vote on how the company should be run? Perhaps for a while.
But if the company starts to report disappointing growth in sales, earnings and subscribers, investors may clamor for more of a say.
"The lack of any voting shares for stock may not matter initially," said Tara Hedlund, a portfolio manager with Pennsylvania Trust. "But it will matter if Snap doesn't execute."
