Is there a total number of shares distributed?

Question

When a company makes a share available, is that a unit of a larger whole?

Meaning, say, a company is worth $100 and wants to offer 50% shares. Does that mean it makes 50 shares available, at $1 per share?

What happens when it wants to offer more for purchase, say an extra 10%, does that dilute the value of other shares?

Please verify that my edits maintain the spirit of your question. — RonJohn, Jun 7, 2019 at 1:21

RonJohn · Accepted Answer · 2019-06-07 01:28:25Z

1

Does that mean it makes 50 shares available, at $1 per share?

Maybe.

What happens when it wants to offer more for purchase, say an extra 10%, does that dilute the value of other shares?

Yes. This is why the current owners must vote on whether or not to issue more shares.

They might offer themselves the opportunity to buy the shares before the public does, possibly at a discount.

And if the vote was to sell more shares, minority owners who lost the vote might file suit to try and prevent it.

answered Jun 7, 2019 at 1:28

RonJohn

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Why would they vote to issue more shares, if it results in them diluting their overall stake, won't it force them to purchase more shares just to mantain their stake ?
– Darren rogers
Jun 7, 2019 at 1:42
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@Darrenrogers they would issue more stock (think of it as a Secondary Public Offering), diluting their holdings, for the same reason that companies perform Initial Public Offerings (which dilute the ownership of the existing owners: the extra capital will hopefully grow the company and therefore the share price, thus making them richer.
– RonJohn
Jun 7, 2019 at 2:11
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Shareholders have the right of pre-emption, which means that if the company wishes to raise more money by issuing more shares, existing shareholders have the right to buy the quantity of shares necessary to maintain their same percentage interest in the company.
– xirt
Jun 7, 2019 at 3:44
@xirt Shareholders do not have the right of preemption in all jurisdictions, e.g. it must be granted by the company in the US.
– user71659
Jun 7, 2019 at 18:17

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