My (possibly incorrect/incomplete) understanding is that if a pre-IPO company needs $1000, they can issue 100 shares for $10 each. If people outside the company actually buy all 100 shares at that price (which I think almost always happens), then the company gets the needed $1000. Thereafter, if the stock price becomes $15 or $2, how does it matter to the company? They’ve already received the $1000 they needed, right? Any subsequent trading isn’t actually generating money to run the company, right?
In: 8
The 100 shares are now 100 votes in the company out of a possible 100. And the main thing that they vote on, is who sits on the board of directors. The board of directors have a bunch of responsibilities but one of them is hiring the CEO.
Essentially, if the CEO wants to keep their job, they have to keep making sure that the 100 votes are kept happy by either giving them money, or by increasing the value of their shares. If they don’t do this correctly, it would be very easy for them to make sure that a new CEO is hired instead.
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