If the company is listed and publicly traded (=traded on a stock exchange), then you get paid according to the value of the stock you own. But what happens if you are the founder of a company and you let your company to an initial public offering? How much of the stock do you get?
How do you do an initial public offering? Do you literally call an investment bank and ask them to do one for you? How much are you obliged to pay them for the service? Is the ability to do an IPO restricted to investment banks?
Who determines, or on what basis is it determined, legally, who the founder of a company is? And if you become the legal founder (sole proprietor), and you sell the company that you are the founder of, do you get paid an amount equal to the entire value of a company that you are the founder of, whether the valuation be from DCF or whatever other method?
-
1When a company is sold, both parties agree on a sale price which can be all cash, shares plus cash, or all shares. Every shareholder gets that amount. Explanation of the IPO process can be found by doing a Google search.– Bob BaerkerJun 28, 2020 at 10:12
-
1These are very generic questions, please go through various questions on the forum and come back with a specific question– DheerJun 28, 2020 at 11:37
-
“Founder” isn’t related to share ownership. You can sell or give away your shares or be diluted to peanuts and still be the founder.– LawrenceJun 28, 2020 at 11:47
1 Answer
Starting with question 3.
Who determines, or on what basis is it determined, legally, who the founder of a company is?
The founder is the person or people that create the company. If they sell the company 100% to somebody else, that new person can be called the owner but they are not a founder.
And if you become the legal founder (sole proprietor), and you sell the company that you are the founder of, do you get paid an amount equal to the entire value of a company that you are the founder of, whether the valuation be from DCF or whatever other method?
If you are the only owner of a company and you sell the company and you retain no ownership percentage, and no advisor role, then you get 100% of the agreed "money".
Now on to question 2:
How do you do an initial public offering? Do you literally call an investment bank and ask them to do one for you? How much are you obliged to pay them for the service? Is the ability to do an IPO restricted to investment banks?
Most companies doing an IPO go to a investment bank to do this. There is a way to do something called a direct listing where the early investors sell their shares instead of the company selling shares.
But sticking with the IPO through an investment bank. Yes they get paid. Everything regarding the IPO is negotiable. If you are a big company then the investment banks will be begging you to go public. If you are a small company and not well known, you will have to approach them. Then the negotiations begin.
You negotiate the fee, the percent of the company and the initial price the shares will be offered at.
Now question 1 regarding selling the company:
If the company is listed and publicly traded (=traded on a stock exchange), then you get paid according to the value of the stock you own. But what happens if you are the founder of a company and you let your company to an initial public offering? How much of the stock do you get?
If all the shares are equal then every share gets the same amount of "money". But not all every sale results in cash. Sometimes the sale of the company results in a new merged company, and everybody gets new shares in the new company. Sometimes they only sell a part of the company: they sell the paper division but keep the printer division. Therefore you could end up with a combination of shares and cash.
If you are the founder, and you have done a IPO or sold any part of the company to investors and you still own shares then you will get the amount of money your shares are entitled to. It is possible that the new company may want to retain some key people, so the found or other key people could get a special offer of cash or stock to stay around for X years.
In some companies there can be different classes of shares that have more voting power or receive a different dividend payout. Those shares could receive a different amount of "money" per share if the company is sold.
