4 ms·

they have an extremely disproportionate share How is it “disproportionate”? It’s their property! I don’t get to say to my neighbours, you didn’t mow your lawn

• zaroth 7y ago
  I think you may have a fundamental misunderstanding of how equity works if you are suggesting it should be illegal for companies to issue new shares without unanimous shareholder consent. Dilution is a natural and expected function of a company as it grows. How else would you possibly hire new employees and give them equity without inherently diluting existing shareholders. Requiring unanimous shareholder consent to hire a key employee is not only absurd, it would practically doom the company to failure. It’s crucial to understand that companies are governed by their Articles of Incorporation. Some of these articles will specifically define voting thresholds for authorizing and issuing new shares. Every shareholder is legally agreeing to theses Articles of Incorporation when they acquire their shares. Similarly to your point about Preferred Stock. This is a legal agreement entered into which is entirely appropriate and in fact essential to the fund-raising process. If it’s illegal to give investors Preferred Shares in return for their cold hard cash, all that will do is dramatically reduce the valuations which companies can raise money at, which will in fact dramatically increase common stock dilution.