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How did the laws get so complicated? Common sense would dictate that the best way to handle equity is to have people given equity retain the percentage in the c

by phaus 13y ago

How did the laws get so complicated? Common sense would dictate that the best way to handle equity is to have people given equity retain the percentage in the company (that they were promised) and just multiply their shares to reflect any new shares that are issued. To a layman like myself it just seems like all of these additional ways to manipulate the stocks were created for the sole purpose of fucking people out of money. Am I right, or is there actually a reason for doing things like this?

rmah 13y ago
No offense, but that's not common sense, it's naivete. Strong anti-dilution rights causes many problems. Most commonly, it makes it very difficult to attract new investors. Also, your math ("just multiply their shares to reflect any new shares that are issued") doesn't work. Try it on paper and you'll see why :-)
- phaus 13y ago
  I didn't really explain myself very well, because as I said, I'm just a layman when it come to the subject of stock options and equity. My post was mostly a question. I wasn't trying to say that the new shares shouldn't detract from the overall value of each share, clearly no matter how many there are the company will still only have 100% of it's value to distribute amongst shareholders. Unfortunately, that's the way I sounded. What I'm really trying to understand, is how a person can go from owning a significant percentage of a company, to having his shares become worthless, even if the company is worth quite a bit. It seems like any system of regulations or laws that allows something like that to occur must be fundamentally flawed. I've taken some economics classes, but they don't really delve into issues like this. Can anyone recommend a good resource for learning how this works?
zaroth 13y ago
Taxes and corporate governance is certainly complicated, but the basic concept of a share is not. If you work through some common scenarios, you'll see how the concept of owning a 'percentage' breaks down really quickly, and the concept of owning a 'share' actually keeps things very simple. There's nothing about it that's for the purpose of fucking people out of money, but like many things in life, it's perfectly possible to achieve that effect.

by phaus 13y ago

rmah 13y ago

No offense, but that's not common sense, it's naivete. Strong anti-dilution rights causes many problems. Most commonly, it makes it very difficult to attract new investors. Also, your math ("just multiply their shares to reflect any new shares that are issued") doesn't work. Try it on paper and you'll see why :-)

phaus 13y ago
I didn't really explain myself very well, because as I said, I'm just a layman when it come to the subject of stock options and equity. My post was mostly a question. I wasn't trying to say that the new shares shouldn't detract from the overall value of each share, clearly no matter how many there are the company will still only have 100% of it's value to distribute amongst shareholders. Unfortunately, that's the way I sounded. What I'm really trying to understand, is how a person can go from owning a significant percentage of a company, to having his shares become worthless, even if the company is worth quite a bit. It seems like any system of regulations or laws that allows something like that to occur must be fundamentally flawed. I've taken some economics classes, but they don't really delve into issues like this. Can anyone recommend a good resource for learning how this works?

zaroth 13y ago

Taxes and corporate governance is certainly complicated, but the basic concept of a share is not. If you work through some common scenarios, you'll see how the concept of owning a 'percentage' breaks down really quickly, and the concept of owning a 'share' actually keeps things very simple. There's nothing about it that's for the purpose of fucking people out of money, but like many things in life, it's perfectly possible to achieve that effect.