IPO for dummies. Part I: stocks, majorities, control of the company

    During a recent discussion of Yandex's IPO , a discussion was held in the comments on how stocks are traded on the stock exchange, how an IPO goes, who benefits from it and what. On the advice of other participants in the discussion, I am putting out in a separate topic - or rather, in a series of topics - a short story that was dispersed over several comments. If you then carefully followed the topic, the main part of the story is already known to you, but nonetheless ... If not, you will surely find something interesting.

    Disclaimer: this and further articles of the series were written by two habraboters: honeyman , a startup programmer, experimenting with free trading on the stock exchange and creating analytical software for this, in collaboration with kaichik- journalist and chief editor of automotive projects. If you didn’t notice the words “financier”, “licensed advisory economic services” and “rich experience” in the previous sentence, then this is probably because they cannot be there.

    • Part I: stocks, majorities, control of the company.
    • Part II : stock prices, stock exchange, the best way to trade potatoes, and who can be found on the stock market .
    • Part III : IPO process, its benefits for the company, founders and owners, as well as why the company management has such a tortured look at the opening of tenders.
    • Part IV : Impact of IPOs on Ad Partner Affiliate Revenue
    • Part V : life after an IPO.
    • Part VI : Challenges of Choice - Two Lamborghini Gallardo or One Aventador?
    • Part VII : About Insider.
    • Part VIII : On Motivation.


    So, part I: stocks, majorities, control over the company.

    What are stocks, and why are they needed?

    Shares, no matter how trite and obvious - this is a document confirming the ownership of part of the company.

    Everything is absolutely honest: if someone collects all the shares of the company, they will receive a bonus life and the transition to the next levelcompany in sole ownership. In the simplest case, the number of shares you have shows (a) what degree of influence you can exert on the management of the company (how many votes you have in the event of voting) and (b) what share of the profit (in proportion to your share of all shares) you can get if the company decides to distribute profits in dividends. At the same time, according to paragraph (a), your vote can influence the decision on whether the profit will be distributed in dividends and what size they will be. There are technically different implementation options: there may be “non-voting” shares, or shares that are given a dozen votes, but these are subtleties.

    Yeah, if a company started selling stocks on the stock exchange, some large Google Citibank could buy them all.buyer, and get company management?

    Firstly, during an attempt to buy shares on the stock exchange, he will begin to have difficulties. After market participants who own these shares and are ready to sell them for a certain amount realize that there is serious demand for the shares, they will significantly increase the sale price. So a large block of shares on the exchange will be very expensive: this is not a store in which the price of shares is fixed. Anyone offering to buy or sell shares at any second can change their application as they wish - and will do so to maximize profits.

    Secondly (and this is even more important), not a single normal company on the stock exchange sells 100% of its shares. Let's say that only 20% rotates there, so the buyer will be able to redeem this freely traded volume as a maximum. The remaining large blocks of shares are owned by majorities , which, as a rule, have a significant number of shares each and purchased them outside the exchange - directly from the founders / owners. For example, during the initial investment.

    How is this usually?

    If businessman Misha launched his social network, perhaps at first he gave ten percent of the shares to the programmer Kolya, who was involved in the technical part. A dozen percent - to an angel investor who gave a million rubles to spin up in a year. Thirty percent in a year went to all sorts of DST and Sequoia Capital, who saw a social network that grew and grew over the year, joyfully dumped $ 5 million on ads and servers. By that time, the number of developers of the social network had grown, and the initial “programmer,” Kolya, was soaking in his own office with the sign “Technical Director N. Nikolaev.” But new developers are known to work much better if well motivated; therefore, a dozen or two percent more were distributed in small portions among developers (“now you don’t just write 5 TPS reports a day, and bring benefits to the company! thanks to you, your company is growing, and the faster it grows, the faster your stock goes up! ”). Misha himself, of course, also left a dozen percent - it just so happened that only 20-30 percent of his company's shares were listed.

    And if someone wants to get the company as a whole and for one-person use, it will not be enough for him to buy up shares on the stock exchange (there are only 20-30 percent). We’ll have to redeem their shares from Misha and Kolya (more precisely, hope that the founders of the company, who have invested all their heart, nerves and energy in it, will want to sell at least one own share for at least some money); redeem shares from DST and Sequoia (they will not experience emotions and moral fluctuations, as the founders of the company, but be healthy for shares), and then bypass all developers and promise everyone Maybach and home in the Bahamas.

    Probably they have heard more than once about how the developer buys small houses on the territory in order to build a New Shopping Center there, and does some old man shuffle and refuse to sell his shack - they say, "five generations of his family lived here?" Of course, “effective managers” can burn a shack together with an old man not for the first time, but if any of the developers get into it, such methods will not bring his share on a silver platter. And if you bring such an intractable owner of shares to a notary to complete a deal (and a large deal after entering a company on the stock exchange will have to be completed with a noticeable amount of bureaucracy), and the notary does not like the amount of bruising and bruising per square decimeter of skin, this will not benefit your business either .

    All this I say to the fact that to buy out the whole company after it began to trade on the stock exchange, or after its shares were sold by a significant number of owners, it’s easier to shoot yourself.

    By the way, if you are interested, Yandex has shares of three levels of "strength": ordinary shares, shares of the founders (each of them provides ten times more votes than one ordinary share, but loses its strength upon sale) and the "golden" share Sberbank also gives the right to veto the accumulation in the same hands of more than 25% of the shares (that is, a blocking stake). It is easy to guess that any of the founders, having only 10% of the shares in their hands, retains full control over Yandex.

    But you can still buy a large package?

    Yes you can. It is unimportant to agree with the majority owners directly (“to make them an offer that they cannot refuse”), or on the stock exchange. Ah, yes, overpay (in relation to what is called the "market price of shares") will have in any case.

    Hurrah! So, if my company becomes famous and goes public, I will sell my shareholding at an exorbitant price and buy a Manhattan peninsula!

    Not. If you want to sell a large block of shares, you will do so at a discount. (If you are allowed to sell it at all, because the rights and obligations of majority shareholders are a completely different topic).

    Therefore, by the way, to evaluate the condition of the founder of the company by the number of his shares multiplied by the value of his shares is complete nonsense (remember the joke about the real and the virtual? “You see, son, virtually we have three bucks in our family, but really, two prostitutes and grandfather- homosexual ").

    Stop stop stop! If I want to sell my shares, I’ll lose money relative to the “market price”. If I want to buy, I’ll lose again. Where do they disappear?

    Everything is simple. There is no “market price." The stock price is not a price tag sticker “120 rubles” on the magazine “Popular Mechanics” in a newsstand. And not even the inscription on the same magazine "Recommended cost - 100 rubles." Rather, it is the speedometer reading while driving in the city: an instantaneous characteristic that constantly fluctuates, usually slightly, but at any moment capable of changing anywhere depending on need.

    Who installs it? And how to trade on it?

    It is set by the exchange. More precisely, even this: not “it is established by the exchange”, but “it is established on the exchange”. The exchange is simply an intermediary between buyers and sellers.

    In the next part : stock prices, stock exchange, the best way to trade potatoes, and who can be found on the market exchange.

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