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Comment by hyperhopper | Hacker News Reader

I thought stocks represented ownership of a company. If a company has 100 stocks and I own 50, I own 50% of the company. If the company issues 100 more, shouldn't 50% go to me, since a share represents a part of the company ownership and I own a known percentage of the company?

How is it legal to say "you bought 50% of this, but now I've arbitrary decided that I own 99% of it because I gave myself more percent"

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Nothing on paper says "You own 50% of the company".

The company starts up, it has 100 shares, you get 50. If you calculate it, you own 50%.

Later on the company needs to raise cash, so it issues another 100 shares. Company now has a ton of cash in the bank. Total shares outstanding is 200. Now you own 25%.

Then whats the point of buying a stock if it doesn't even entitle you to ownership of a company?

At least in theory the extra cash raised by selling the new stock makes the company more valuable, so your shares remain worth the same before and after. Actual practice is a lot more nuanced - the company might not be able to sell the new stock at a high enough price, or they might spend the new money immediately on hookers'n'blow^W^W^W unsound investments.

what does ^W^W^W mean

The other answer to this is correct, but a little more detail in case you're interested:

^W is a control code. This specific one represents the keys ctrl+w, a keyboard command in Vi and Bash among other things. It deletes the previous word. You often see something similar with ^H as well, which is a single-character backspace. https://en.wikipedia.org/wiki/Backspace#^W_and_^U has some more information about these.

Some people use them more to make visual jokes in written text, more or less the same way you'd use strikethrough formatting in text.

And in my experience ties in nicely with the fact that when a dumb terminal glitched or lost sync with the server, control codes would start to litter the screen instead of being interpretted. You'd see things like:

…thsi typo^Ŵ^H^H…

start to appear, sometimes followed by several random letters hit in frustration, before the final hard-reset of the terminal and resignation to the fact some unsaved work has been lost.

I wish there were more people like you on the internet.

Remove previous word

Depending on the company bylaws you typically need at least a simple majority of the votes / stocks to issue new stocks. The company can also have a rule that says that existing share owners must have the right to purchase before everyone else, to "defend" their stake.

In general companies typically raise money because they think the cash infusion will benefit the existing shareholders in the long run, either by not going into ≈bankruptcy or having the cash to do investments / move into new markets etc.

It sounds like you are thinking of publicly listed companies which have to adhere to strict regulation, much different from privately held companies.

Even then, there are no guarantees. A company can simply be mismanaged and overvalued as we saw recently with this Danish airline: https://apnews.com/article/scandinavian-airlines-air-francek...

Now you own a smaller part of a more valuable company, given the the money is well spent. Your net worth shouldn't change much.

Either way, if you had a majority of the voting shares, you could've stopped the issue.

Shares do not imply ownership but participation. That participation can take different shapes, depending on the type of shares and the bylaws of the company: some will be entitled to dividends, some will be entitled to voting on decisions, some will entitle to a form of ownership, etc etc.

It does entitle you to ownership, you as an investor in the company presumably approved the issuance of new shares on the belief that the additional capital would make your investment worth more in the future.

There's for example non-voting stock where you only participate in a potential exit or dividends.

I thought that if the company is issuing new shares, it was customary to give first refusal to existing investors (a "rights issue"?)

There may be a preexisting contract between investors that grants this right of first refusal. In some scenarios (e.g. startup seed rounds) it is customary to require such a contract as part of the investment deal, however, if you don't contract for this right you don't have it, and it may well be that some shareholders (e.g. investors) have this right and other shareholders (e.g. initial employees) don't.

Entirely up to the company.

You can bring in investors, go in retirement, sell your company. So ownership of a company can change. One way of doing that is to sell shares, another way is to give new ones to the newcomers. I don’t know this precise story with Silver Lake, but emitting new shares and diluting past investors to inject cash into the company is sometimes the only solution to bring cash on the account.

It generally requires a shareholder vote to do this, so this is mostly a concern for someone who owns a minority stake in the company. And then it depends on the rules that are actually set up for the company as to what is and isn't allowed with issuing new shares. So it's very much a "read the fine print" situation.

Conversely companies can buy back shares so each share is a larger percentage of the company.

Apple has been doing this aggressively for the past 10+ years.

You can always create more stocks, but that delays the value of each, so investors might not like that.

delays -> devalues, dilutes?

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