eli5 Who/how is it decided how many stocks a company has?

Question

Like if I owned 100 stocks in Walmart. Who/what decides how many stocks make up the entire ownership of Walmart?

In: 0

Answer 1

When you issue stock in an IPO, you have to price out the company and find a value that people will buy the stock at.

So using surveys and financial models you decide that the company is worth a certain amount. Let’s use $500 million as an example.

So you have to divide the company into enough pieces so trading stays liquid. That means minimum you’ll need a few million. But you also want to sell at a price that is easily digestible. Let’s aim for $10-50. For a market cap of $500m, that means 10-50 million shares issued.