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


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

In: 0

The board of directors decided when to issue more stock. You can also define the number of shares you start with when you form your corporation.

I have a small s corp which is just me and I own 10% of the 1 million shares I issued in the beginning.

That’s up to the company to decide how many “slices” they want to carve the company into. The fewer the slices, the more each slice is worth. Start to run out of slices? Cut the existing slices into even more slices.

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.

When a company is founded the original paperwork describes the stock structure. Normally small companies might have 100 class A shares, but they could just as easily have 100,000,000 class A shares. It’s just a number that a lawyer typed on a document.

As companies grow and change the sare structure changes. The share structure for a single owner managed company is not the share structure you’d like for a 100,000,000 retail chain. So as the company grows the board of directors and lawyers change it by passing bylaws.

> Who/what decides how many stocks make up the entire ownership of Walmart

The Walmart board of directors does by passing corporate bylaws.