Dating App Bumble’s High/Low Vote Structure Approved by Delaware Court

A recent Delaware court decision reaffirmed that companies could implement an identity-based voting structure within a single class of stock. In Colon v. Bumble, Inc., the Delaware Court of Chancery, Delaware’s highest court, ruled that the dating app company Bumble could maintain a stock structure that provided superior voting rights for certain holders of common stock.

Bumble has two classes of common stock: Class A common stock and Class B common stock. The Class A common stock carries one vote per share, unless the share is owned by a “Principal Stockholder.” The company’s certificate of incorporation defined a “Principal Stockholder” as the company’s founder Whitney Wolfe Herd and Bumble’s primary financial sponsor, Blackstone, Inc. Such shares of Class A common stock that are held by a “Principal Stockholder” are entitled to 10 votes per share and economic rights in Bumble.

Similarly, the Class B common stock carries one vote per share, unless the share is owned by a “Principal Stockholder.” Only two shares of Class B common stock were issued—one share to Whitney Wolfe Herd and the other share to Blackstone. The shares of Class B common stock that are held by a “Principal Stockholder” are entitled to 10 votes per share, but no economic rights in Bumble.

As a result of the identity-based voting provisions created by Bumble’s certificate of incorporation, Whitney Wolfe Herd and Blackstone together held over 90% of the outstanding voting power in Bumble at the time of the court case.

This stock structure was in place at the time of Bumble’s initial public offering (IPO) in 2021. Bumble used a combination of an Up-C deal structure and a dual class, high/low vote structure in order to maintain better control over the company after the IPO and to obtain other advantages.

An Up-C deal structure involves a flow-through entity, which is typically structured as a limited liability company or limited partnership, and a newly formed public company, which is typically structured as a C corporation. An Up-C structure benefits historic owners, providing them access to the public markets while maintaining ownership through a partnership for tax purposes. The historic owners can exchange their partnership interests for shares in the public company while retaining the benefits of having a flow-through structure.

The plaintiffs in Colon v. Bumble, Inc. challenged Bumble’s stock structure, claiming that it violated Section 212 and Section 151 of the Delaware General Corporation Law (DGCL) because it resulted in disparate voting rights among holders of the same class of stock.

The Delaware Court of Chancery upheld Bumble’s voting structure as valid under Delaware law. The court concluded that the voting structure complies with the DGCL and precedent case law. There are a number of Delaware precedent cases in which companies had a provision in their certificate of incorporation allocating voting power to stockholders based on a specified formula.

The outcome of this case has important implications for companies. It demonstrates that companies have some discretion in designing structures to enable certain stockholders to maintain voting control. Specifically, it shows that it can be permissible to give certain stockholders superior voting rights by implementing a high/low voting structure within a single class of common stock.