Shopify shareholders to vote on founder share, stock split at annual general meeting

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Shopify Inc. shareholders will vote on whether the company should adopt a new corporate governance structure that would give its chief executive a non-transferable founder share.

If passed at Shopify’s annual general meeting Tuesday morning, founder Tobi Lütke would have voting power for as long as he is at the Ottawa e-commerce software company. He, his family and affiliates would also hold 40 per cent of the company’s voting power.

The founder share will sunset if Lütke no longer serves as an executive officer, board member or consultant whose primary job is with the company or if Lütke, his immediate family and his affiliates no longer hold a number of class A and class B shares equal to at least 30 per cent of the class B shares they currently hold.

In the event of a sunset of the founder share, Lütke will also convert his remaining class B shares into class A shares.


At least one proxy advisory firm, which compiles reports for shareholders ahead of such votes, opposes Shopify’s proposal. Glass, Lewis & Co told clients last month the move limits shareholder rights and inadequately protects minority shareholder interests.

Shareholders will also vote on whether the company should carry out a 10-for-one split of the company’s class A and class B shares, which Shopify has positioned as a way to make voting shares more affordable to a boarder segment of the population and diversify its ownership base.

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To be approved, the share split must garner the support of a two-thirds majority of shareholders and at least a majority of the votes cast by shareholders excluding Lütke and his associates and affiliates.

If passed, Shopify director John Phillips will convert all class B shares held by Klister Credit Corp., a company the early investor owns with psychologist-wife Catherine Phillips into class A shares.

As of March 31, Glass, Lewis & Co said Shopify had about 114.2 million class A subordinate voting shares and roughly 11.95 million shares of class B multiple voting shares. Lütke owned 5,250 class A subordinate voting shares and 7.9 million class B shares, giving him about 33.8 per cent of Shopify’s voting power.

John and Catherine Phillips jointly hold 3.75 million class B shares, representing slightly more than 16 per cent of Shopify’s voting power, Glass, Lewis & Co. said.

The impending votes come after Shopify shares plunged from a 52-week high of $2,228.73 in November to a low of $402 in mid-May. The stock closed at $452.54 on Monday.

In response, company executives, including Lütke, president Harley Finkelstein and vice-president of merchant services Kaz Nejatian tweeted they were purchasing shares as a sign of their confidence in the business.

Lütke posted that he alone placed a $10-million order for shares and reasoned that he made the purchase because “it’s time to build,” while Nejatian said he liquidated some of his family’s portfolio to make similar moves.

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“When everyone else has sought reward from safety, we have sought reward from serving others and from taking risks,” he said in a note he posted to Twitter.

“And every year, we have gotten better and better at taking bigger risks and serving more people.”

This report by The Canadian Press was first published June 7, 2022.

Companies in this story: (TSX:SHOP) 

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