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?