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Hello Rosie:
If you own just a tad more than 50% of a company, you CONTROL it.
excon
So can you control how much of your stock is sold to outsiders excon? Can't you retain 51% forever and therefore maintain control? Thank you for your reply and Happy Saturday! :)
If you own a company and want to expand it, you need money.
That is usually achieved by floating the company on the stock exchange.
So you approach investors to raise the funds you need.
Joe Bloggs doesn't have the funds so initially it's institutions that will agree to give you the dosh on condition that they get 51% control. It's a sort of guarantee.
If your company does well, they will be pleased, if you're not doing so well, they'll give you the boot and get someone else to run the joint.
That just boggles my mind though Grasshopper. Someone creates and originates and works his/her a** off getting a company going and it becomes profitable and then folks invest it in and those outsider folks who didn't do a dam* thing but provide money can fire him/her? That makes n
o sense to me. Thank you for your thoughtful and informative answer m'dear and Happy Sunday to thee! :)
So why in the he** don't they retain the largest percentage then so that no lousy outsider wealthy stockholder can boot them? I just don't get it excon. Fair is fair and I don't think
that's fair at all. Thank you for your reply! :)
Hiya Rosie,
OK, I understand however, allow me to give you a different slant on this!
First, this sort of thing doesn't happen every day! The creator/owner only gets the boot if they make a mess of the business, and that, if ever, is unlikely to happen within the first few years. There can be no doubt that the business must be a success when the institutional investors agree to sponsor the enterprise. They do not tend to invest in risky businesses. Obvious, OK, right!
Now, some people have no problem running a small joint quite successfully but as soon as it gets big, they need help to avoid stagnating or even falling profits. Large investors/institutions would do everything to help but if such help was rejected or if profits were still not recovering, worse still, if losses were increasing, then clearly something would be very wrong, the most likely cause must be that management has failed and then the real danger is that it all goes belly up.
Now imagine you personally are a shareholder in this company! You invested because you believed in the owner and his product and for a few years, all goes well.
You even increase your holding in the company because the share price and dividends give you a decent return.
No one could blame you if you would complain when the share price was beginning to collapse, dividends are suspended, and your investment is suddenly worth just a fraction of what it ought to be.
Most shareholders would surely consider voting in a new team at the next AGM hoping that was the cure for getting the business going again.
After all, YOU TOO would probably have worked very hard for the money you invested in the first place.
Happy Sunday ....:))
Nothing, raising capital is the purpose of selling stock.
Because they own the company.
((hugs)) I get it m'dear. Thank you for taking the time to provide me with a different view of what I obviously know nothing about. Locally in LA years ago there was a men's clothing store called "The Men's Warehouse" I believe and it became hugely popular. For years. Then I read that the owner/creator/orginator got the boot from the stockholders. I didn't know the backstory or any details. Perhaps they were as you described and he was very good at small business but not so good when it became too big for his talents. Thanks for the education Grasshopper. I appreciate you a lot! :)
