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Comment by wslh | Hacker News Reader

> To first order, current shares should be worth a smaller fraction of the company, but should be worth the same dollar amount as they currently are.

Is this fair? I mean, you lose power because you have less shares. The share price is only part of the investing story.

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It's how it has always worked. If you already own x percent of the company (a sizeable enough percentage to influence voting) then you buy in. You probably were a shareholder consulted about the plan anyway.

If you weren't, your shares are still worth the same amount, so even though your voting percentage has gone down you still have the same value of stock, so it shouldn't affect you materially anyway.

Yep, so long as the price is fair.

You owned x/(Tesla^). Now you own x/(Tesla^ + 500M). (Tesla + 500M)>(Tesla) so your share is proportionally smaller. Put another way, you own a share of tesla. The day after the offering, Tesla has 500MM more in the bank and you own a percentage of that money.

Real life is complicated in all sort of ways. Demand for shares does not perfectly trace inherent value (an unknown number). The action could act as a signal to investors to buy or sell ("They need money because they're growing so fast!" or "They're bleeding cash, run!."). But theoretically, it's supposed to be perfectly fair to shareholders

^Tesla = all Tesla assets the day before the offering.

you have less power but over a more valuable company that's how it works

I think for voting power in large companies, 200 shares and 2000 shares compare as approximately equal (probably 20,000 too).

There are, however, often institutional investors who own meaningful amounts of a conpany's shares.

I don't see how that is a however, my point was that there is some threshold below which an investor is basically irrelevant when it comes to control of the company, not something about whether there are large holders of shares. As a small investor, this usefully informs reasoning, because you are not buying control of the company, you are giving control over your investment to the people who do have meaningful amounts of stock.

(For instance, when Google IPO'd, they made sure that everybody buying stock in the IPO was irrelevant to control of the company by issuing a different class of shares to the founders/insiders)

But if a company increases in value, shouldn't the value of your shares go up? I mean, isn't that the whole point of owning a percentage of a company?

The increase in value only came from the new $500m in cash. That cash didn't come from the company's operations and it didn't come from you, so there's no reason to think that your shares would increase (or decrease) in value.

No because each share is worth a proportionally less chunk of the company. .. but don't get me wrong: speculators could certainly assume that it should mean that the stock price goes up and longer term it could enable the company to grow faster and in the end that could also cause its value per share to go up but immediately it doesn't really make sense for it to

Keeping the same voting rights as before would mean the new shares would be issued with no voting rights. Which is possible, but would then discount the price people are willing to pay for them.

Well, presumably this had to be approved by the board, which is elected by the shareholders. So democratically speaking, yes it's fair. They chose it.

Yes. Its better than losing your investment. If you don't like it, buy 51% or cash out.

You aren't forced to "accept" it.

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