# Where can the founder of a company sell his stocks?

Let's assume that we have a tech company that wants to go public. In its IPO, the founder of the company wants to get $10 millions for 10% percent of the company. Those$10 millions will be represented by 1 million share at $10 each. The 10% is now publicly traded and the price of the shares can go up or down based on the demand. Meanwhile, the other 90% of the company still belongs to the founder and its co workers. Is the 90% of the company converted to shares as well? Does this mean the founder + co workers own$90 million shares?

Now let's say that in 10 years, the company public shares are worth $250 each (so the market cap is$250x1 million shares = $250 million dollars). What happens if the founder wants to sell 5% of his shares? Is he allowed to sell them on the public market? Doing so, it means that the structure of the public market will now change since the market was capped at$1 million shares and he wants to sell another 500.000 which are not publicly traded on the market.

I don't really get this part of the equation and an answer will be very much appreciated.

In my own head, it would make sense that when the IPO is issued all the company is converted to shares and 100% of the company is traded publicly. The idea is that the company will hold 90% of the stock market and the other 10% is there for anyone to buy. But this is not the case right? I don't get what happens with the other 90% and how do you sell the 90% if you want to?

For example, I know that the founder of Amazon Jeff Bezos holds 11% of the shares in the company. If he decides tomorrow to sell 5% of them, how he would do it? I'm pretty sure those are not public shares. What shares are they then? And how do you sell them?

Crucial fact that you seem to be missing: before the company becomes public (i.e. before the IPO), it already has shares. For example, the company may have had 9 million issued shares before the it went public. In your example, all of these 9 million shares will be owned by the founder and co. When the company goes public in an IPO, it may decide to issue 1 million new shares to raise money. So after the IPO, there will be 10 million shares, of which 10% are owned by people who bought at the IPO, and 90% are still owned by the founder and co (assuming they did not sell any shares that they own).

Is the 90% of the company converted to shares as well?

There is no "conversion to shares" because those shares already existed prior to the IPO. An IPO merely mints new shares.

What happens if the founder wants to sell 5% of his shares? Is he allowed to sell them on the public market?

Yes, of course. Shares are shares. The shares that the founder and co own are indistinguishable from the shares issued at the IPO.

In my own head, it would make sense that when the IPO is issued all the company is converted to shares and 100% of the company is traded publicly. The idea is that the company will hold 90% of the stock market and the other 10% is there for anyone to buy.

There is no "conversion to shares", because they were already shares before the IPO. After the IPO, 100% of the shares are publicly tradable. The company does not "hold 90% of the stock market"; the shareholders hold 100% of the shares, of which 90% are owned by the founder and co, and the remaining 10% are owned by the people who bought shares at the IPO.

For example, I know that the founder of Amazon Jeff Bezos holds 11% of the shares in the company. If he decides tomorrow to sell 5% of them, how he would do it?

Jeff Bezos holds 11% of Amazon's shares, so he is a shareholder of Amazon. Therefore, he could simply sell them just as any Amazon shareholder can sell their shares.

I'm pretty sure those are not public shares. What shares are they then? And how do you sell them?

Every share has an owner. If Jeff Bezos is the owner of a share, he can sell them whenever he wishes. There is no exact concept of "public shares". There is, however, the concept of public float.

• "The shares that the founder and co own are indistinguishable from the shares issued at the IPO." Whoa. I will gladly trade you GOOG, Facebook or Comcast Class A shares one for one for GOOGL, Facebook or Comcast Class B shares - deal? The OP did specify a "tech company" and the voting rights of different classes of shares, typically owned by the founders, are a huge part of the legal gamesmanship undertaken during current tech IPOs, and which missing from this answer entirely. Sometimes the voting rights class shares are not publicly listed. Commented May 26, 2020 at 4:33
• @user662852 My answer assumes that the company has a single class of stock. OP used the example of Amazon, which happens to have a single class of stock.
– Flux
Commented May 26, 2020 at 4:36
• An IPO doesn't necessarily create new shares, it is an Initial Public Offer. It can, but often it just publicly offers the shares that before were owned by the founders. Commented May 26, 2020 at 10:46
• It's not relevant to my question that there are multiple types of stocks. I wanted to understand the concept with just a single type of stock, which this answer addressed. Thank you so much! So just to be clear, the Market Cap for a company represents all the 100% shares for that company? It's not only those 10%? Commented May 26, 2020 at 12:42
• @ConstantinDogaru Yes, the market cap of a company is calculated using 100% of the shares of the company. If you only want the market cap of the public float (i.e. the 10% in your example), the term you are looking for is "free float market capitalization".
– Flux
Commented May 26, 2020 at 12:52