I think the more interesting part of the story (if I'm reading it right) is he paid $5000 to completely own a company with millions in assets.
Besides the money, they also wanted to test the waters before going in with a larger percentage and I don't know if the market could have handled a new 1.7 Trillion dollar company joining all at once.
For example shareholders don't have any control at FB, since Mark controls 51% of the voting power.
"but unlike common shares, they do not confer voting rights to shareholders. As a result, these shares tend to trade at a discount to Class-A shares. "
https://www.investopedia.com/ask/answers/052615/whats-differ...
Tech/growth doesn't pay dividends as dividends are a signal your business is done growing. Dividend companies would rather return capital to investors than place more bets and keep growing.
Tech and growth stocks have minted many millionaires. And sometimes overnight.
This is also why growth companies sometimes don't reach profitability. They're spending their revenue eating the rest of the market and gaining monopoly.
> no control?
People that invested in Facebook made lots of money. They were probably fine with the arrangement. If they stop being fine with it, the stock price will decline.
That's not the hypothetical that was posed.
As in, you agree than a couple insiders could control a large majority of a company, and that this percentages of the company would not be on the open market, and therefore even if you buy all of the shares that are available on the open market (and the definition that I am using would disclude these shares owned by these insiders), you would not control the company?
Sure, it's possible that at any given time people aren't offering to sell a majority of the voting power of stock, or (theoretically, at least) any voting stock at all (it's even possible that the only class of stock trading on the market is nonvoting; SNAP I think does that.)
I was taking issue with the particular claim, made twice in the direct chain of ancestry of this comment, that a company could simply hold the majority of it's voting stock itself, so that holding 100% of the shares not owned by the company would not give you control since the company itself (presumably, it's management) would exercise most of the voting rights. It doesn't work that way.
Let's chalk it up to a miscommunication.
If you have 100% of them, you have all voting rights.
Plenty of takeovers have been conducted on the open market, even without consent of the board, also known as a hostile takeover.
Global Links was trading around 10c a share with ~350 million shares, for a market cap of around $35 million. They implemented a 350:1 reverse share split, which in theory should have resulted in them having a stock price of $35, 1.1 million shares, and a market cap of around $35 million.
For some reason, it took longer for this to shake out than expected; in the immediate aftermath it was reported that enormous quantities of Global Links stock was still trading, and the share price had actually declined to a 8 cents.
Presumably, some systems were reporting "old" numbers (pre reverse split) and some "new" numbers (post reverse split), and I'm sure an enormous amount of confusion resulted. And it was at this point Simpson reckons he bought 1.2 million shares for a bit over $5,000.
That's less than 1/3 of a cent per share, which seems wildly off (the share price was 10 cents pre reverse split, and would have been expected to be $35 afterwards), but given that it seems a lot of computer systems were not handling this correctly, who knows what he was told by his broker?
So...obviously Simpson did not purchase 110% of a company, and he definitely didn't do so for 0.01% of its market cap. I rather assume his broker had told him that he had done so, but that seems like fodder for a lawsuit between him and his broker over their buggy systems, but it doesn't tell us much else. It's possible he might have ended up owning 3.6k shares (about 1/3 of a percent of the company), but even that seems doubtful if it actually only cost him $5k.
Anyhow:
> I think the more interesting part of the story (if I'm reading it right) is he paid $5000 to completely own a company with millions in assets.
I think the better reading of that is some guy found a bug in a broker's system that caused it to tell him he'd done that, but it would have been obvious to all concerned that whether he'd ended up with 0 shares, ~140 shares, or ~3.5k shares, he definitely didn't have 1.2m shares, since they never even existed.
Global Links intends to do a reverse split, replacing 350 old shares (worth 10¢ each) with one new share (worth about $35). For the sake of argument, let's say they mixed up the ratio in their split filing. Instead of doing a reverse split, they do a forward split, replacing each share of old stock (10¢) with 350 shares of new stock (about one third of a cent, each). The shares trade at a somewhat high volume, because each share is worth a fraction of a cent.
Simpson notices that, after a 350:1 reverse split, Global Links ought to have about 1M shares outstanding.¹ He also notices that the current trading price is a fraction of a cent. Small enough to make this a worthwhile experiment. He acquires about 1.2M shares without moving the price too much. He also doesn't question how this was possible to happen within a day or two.
After the split, Global Links has some 100B shares outstanding. Simpson's position of 1.2M is less than one percent of that, so the shares continue trading as before.
¹ He might be combining multiple sources of information here. Perhaps his brokerage doesn't show reference data, so he combines the price he sees in his brokerage's app with reference data from Yahoo!finance or something.
No "owned the publicly traded shares of a company". Those shares are almost certainly non-ownership, voting shares. And if they are it's possible/probable that founders/investors/others hold an arbitrarily large multiple of traded shares or options for shares or convertible bonds or whatever.
What he owns is (somewhere in the line of creditors) the right to some part of assets if it's dissolved (sold, enters bankruptcy) exact triggers and rights are complex and varied.
After all liabilities are deducted. Which usually means nothing.
Firm value = equity ("market cap") + debt + various, see
Except, for example, if there were different share classes with voting rights or if the "float" is small [0].
[0] https://www.investopedia.com/articles/basics/03/030703.asp