Snap (NYSE:SNAP) is down 4% to slip below $20 for the first time since the IPO. reported earlier today that Snap could face some investor lawsuits over the high level of non-voting shares issued as part of the public launch. That’s right. Unprecedented issuance of non-voting shares as part of its IPO earlier this month is expected to be met with investor-backed lawsuits charging that the developer of the disappearing message app’s stock structure deprives shareholders of a fundamental right to a vote on their investment.

That’s according to governance experts, Delaware lawyers and a former Delaware judge, who say they expect to see lawsuits submitted in the coming weeks and years by disgruntled institutional investors complaining that they were deprived of a vote. At issue is Snap’s highly-successful IPO on March 2 at the New York Stock Exchange under the ticker SNAP. It priced its IPO at $17 and quickly rose to $27 a share, before dropping and trading mid-day Wednesday at around $20.54 a share.

Public pension funds and other shareholders are worried that Snap, which is incorporated in Delaware, has become impervious to campaigns typically launched by activist institutions or hedge funds because its board make up will be effectively controlled by co-founders Evan Spiegel and Bobby Murphy. Also, they complain that many institutions may soon be required to buy Snap’s shares because the issuance is expected shortly to be included as part of key indices, such as the Russell 3000, which they use to base their passive investment allocations.

Any such lawsuit may focus on complaints that institutional investors were deprived of a vote on the main issues, including the election of directors or on whether to approve the company’s external auditors. The post-2008-crisis Dodd-Frank Act gives shareholders a non-binding vote on executive compensation at U.S. public corporations. However, that right won’t be afforded to outside shareholders at Snap, raising another point of contention that could be posed in a Delaware courtroom.

We at Quad7Capital remain bearish on the name. Its no Facebook.

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