Remember that scene in The Social Network when one of Mark Zuckerberg’s original partners
found out that the shares that were once like 30% of FaceBook had suddenly
become like 2% of FaceBook? How does
that happen?
In the movie, Zuckerberg is made to look like an
opportunist who took advantage of his former partner. In many businesses, dilution of an ownership
position happens by design and with purpose.
In fact, all the greatest companies you know have had
shareholders dilute their positions over time to facilitate the incoming
capital that they needed to grow.
This week I answer a question about how share dilution
can happen in a small business and why it can be something that the founding
shareholders may wish to happen. It’s a
follow up question to the video I did last year about how many shares a small
business should have which you can find here: http://www.investlocalbook.com/2016/12/over-last-two-weeks-ive-had.html
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