Equity - kimschles/schlesinger-knowledge GitHub Wiki

You do not have to answer this question, but WTF is the history of companies being private and then going public? Was it the result of a piece of federal legislation? Was is something about the stock market?

kylecoberly [11:22 AM] it has to do with finance good night! (j/k) there are two ways to raise money for a company- debt, and equity you have to pay regular interest on debt, that doesn't scale up with your success if your interest payment is $100k, and you can keep making the payment, who gives a shit selling ownership of the company doesn't require any regular payments, but it does scale proportionally with the business if you own $100k of a $1M business, and then the business becomes worth $1B, you own a $1M of that business now the other thing to consider is that you can raise a lot more through equity than debt selling $1B of equity is a lot easier than getting a $1B loan and then trying to make payments on it now, here's where going public comes in: you can get some VCs to buy a few million of equity here or there and stay private if you want big bucks, you pretty much have to use public markets millions of traders will get you access to more money than any number of VCs will when Facebook IPO'd, it raised $16 billion

kim [11:29 AM] :shocked_face_with_exploding_head:

kylecoberly [11:29 AM] here are the consequences, though:

  1. You're betting your rapid growth period is over. When you're growing quickly, you want more debt financing than equity.
  2. You can actually do something with all that new capital no investor at any level wants to see you sit on their money
  3. All of that is worth being accountable to dumbass shareholders who don't care anything about your business, the people in it, the mission, etc., who can also fire the board of directors. You also become subject to expensive and dangerous legislation like SarBox, where the CEO and CFO have to personally sign for the veracity of their accounting statements, and if they happen to be wrong, can be sent to jail.

kim [11:33 AM] eek

kylecoberly [11:33 AM] So, you also pay millions for sarbox compliance throughout the year but! if the only way forward is $16B, that's pretty much your only option.

kim [11:35 AM] I’m going to have to set aside some time to reread this and do some research. Thank you for answering my question. I had it while reading this article: http://nymag.com/intelligencer/2018/04/dan-mccomas-reddit-product-svp-and-imzy-founder-interview.html Intelligencer ‘I Fundamentally Believe That My Time at Reddit Made the World a Worse Place’ A conversation with former Reddit product head Dan McComas on the problems with Reddit, Twitter, and the rest of the web. Apr 19th https://pixel.nymag.com/imgs/daily/selectall/2018/04/10/internet-sorry/dan-mccomas.w600.h315.2x.jpg

kylecoberly [11:35 AM] oh, one more thing, that kind of gets to the "legislation" part of this I can't just publicly announce that I'm selling shares of develop denver PBC I also have restrictions on who can be a shareholder Develop Denver is (federally) an S-Corp, which has limits on whether companies (like banks, funds, etc.) can be shareholders I can sell shares to you, but if I put out an ad on Facebook, the SEC will murder me one of the more bizarre twists of this is that I may not be able to fundraise even with my buddies unless they're "high net worth individuals" there's laws around that are designed to protect people from giving away their life savings on risky startup investments

kim [11:39 AM] interesting

kylecoberly [11:39 AM] so, if I want to raise equity financing, I either have to go through a VC, or go public. or find some rich people. but I couldn't, say, sell shares to the people of develop denver which I think is fucking wack. but w/e, that's an overview of the equity financing world.

kim [11:43 AM] Unrelated: I love all the pep-talking and advice Magento is getting in #topic-kubernetes career-advice

kylecoberly [11:45 AM] oh shit! one more important player, lol. A public company can go private again if they (or someone else) buys up all the public shares, usually at a premium. This is usually coordinated through private equity firms (that's what Mitt Romney got big for). Once you're public, you can't have a down quarter without risking everyone getting fired by the shareholders. So, if you need to do an internal reorganization, you go private again through one of these buyouts, do what you need to do, and often IPO again. yeah, that's been interesting