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Nothing on paper says "You own 50% of the company". The company starts up, it has 100 shares, you get 50. If you calculate it, you own 50%. Later on the compa
by davedx 3y ago
Nothing on paper says "You own 50% of the company".
The company starts up, it has 100 shares, you get 50. If you calculate it, you own 50%.
Later on the company needs to raise cash, so it issues another 100 shares. Company now has a ton of cash in the bank. Total shares outstanding is 200. Now you own 25%.
- hyperhopper 3y agoThen whats the point of buying a stock if it doesn't even entitle you to ownership of a company?
- abofh 3y agoIt does entitle you to ownership, you as an investor in the company presumably approved the issuance of new shares on the belief that the additional capital would make your investment worth more in the future.
- folli 3y agoThere's for example non-voting stock where you only participate in a potential exit or dividends.
- filleokus 3y agoDepending on the company bylaws you typically need at least a simple majority of the votes / stocks to issue new stocks. The company can also have a rule that says that existing share owners must have the right to purchase before everyone else, to "defend" their stake. In general companies typically raise money because they think the cash infusion will benefit the existing shareholders in the long run, either by not going into ≈bankruptcy or having the cash to do investments / move into new markets etc.
- rwmj 3y agoAt least in theory the extra cash raised by selling the new stock makes the company more valuable, so your shares remain worth the same before and after. Actual practice is a lot more nuanced - the company might not be able to sell the new stock at a high enough price, or they might spend the new money immediately on hookers'n'blow^W^W^W unsound investments.
- PawgerZ 3y agowhat does ^W^W^W mean
- amputect 3y agoThe other answer to this is correct, but a little more detail in case you're interested: ^W is a control code. This specific one represents the keys ctrl+w, a keyboard command in Vi and Bash among other things. It deletes the previous word. You often see something similar with ^H as well, which is a single-character backspace. https://en.wikipedia.org/wiki/Backspace#^W_and_^U https://en.wikipedia.org/wiki/Backspace#^W_and_^U has some more information about these. Some people use them more to make visual jokes in written text, more or less the same way you'd use strikethrough formatting in text.
- IIsi50MHz 3y agoAnd in my experience ties in nicely with the fact that when a dumb terminal glitched or lost sync with the server, control codes would start to litter the screen instead of being interpretted. You'd see things like: …thsi typo^Ŵ^H^H… start to appear, sometimes followed by several random letters hit in frustration, before the final hard-reset of the terminal and resignation to the fact some unsaved work has been lost.
- razodactyl 3y agoI wish there were more people like you on the internet.
- deleted 3y ago[deleted]
- badosu 3y agoRemove previous word
- toyg 3y agoShares do not imply ownership but participation. That participation can take different shapes, depending on the type of shares and the bylaws of the company: some will be entitled to dividends, some will be entitled to voting on decisions, some will entitle to a form of ownership, etc etc.
- sorenbs 3y agoIt sounds like you are thinking of publicly listed companies which have to adhere to strict regulation, much different from privately held companies. Even then, there are no guarantees. A company can simply be mismanaged and overvalued as we saw recently with this Danish airline: https://apnews.com/article/scandinavian-airlines-air-franceklm-shares-7e09213b20f61476a5836409cc47e642 https://apnews.com/article/scandinavian-airlines-air-francek...
- swexbe 3y agoNow you own a smaller part of a more valuable company, given the the money is well spent. Your net worth shouldn't change much. Either way, if you had a majority of the voting shares, you could've stopped the issue.
- denton-scratch 3y agoI thought that if the company is issuing new shares, it was customary to give first refusal to existing investors (a "rights issue"?)
- PeterisP 3y agoThere may be a preexisting contract between investors that grants this right of first refusal. In some scenarios (e.g. startup seed rounds) it is customary to require such a contract as part of the investment deal, however, if you don't contract for this right you don't have it, and it may well be that some shareholders (e.g. investors) have this right and other shareholders (e.g. initial employees) don't.
- reactordev 3y agoEntirely up to the company.