So let’s take any bezos for example. He owns something like 55 million shares of amazon which amounts to about 14% of the company.
A random joe owns 10k shares of his company which amounts to 70% of his company.
So why is there a difference? How do companies decide and increase their number of shares?
Can companies just decide to add more shares or is their a process that follows?
I’m sorry if I’ve completely gotten everything wrong here I’m very young And trying to gather some financial knowledge. Thanks.
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When people create a company, they have to declare how much thing (generally money, but it may be other things) they want to give to it. For instance, let’s say we create a company, and we agree to put $10k each. So, the company’s capital/equity will be equal to $20k.
Now, we have to create shares that will represent those $20k. How many shares? As many as we want, it doesn’t matter. We could print two shares of $10k each, 2000 shares of $10 each, or (generally) 20 thousand shares of $1 each.
With the years, as our company grows, several things may happen. For instance, we may want to invite other people by selling them new shares either private or publicly, or we may find that our company is so valuable than our shares are worth so much that it makes sense to divide them into new shares. Either way, our company now is represented by more and more shares.
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