A simple understanding of Shares

A simple understanding of Shares

Shares representOwnershipThe ownership includes two meanings:Interest distribution right (dividend distribution right), One isVoting rights.

First, let's look at a simple example. Suppose there are only two people in the company. These two people are both partners, start the company together, and are shareholders, each accounting for 50% of the shares.

Assuming that the company had a net profit of 1 million Yuan after excluding all expenses including wages, shareholder 1 and shareholder 2 each had 0.5 million yuan, that is, they had the right to distribute their interests.

Assume that the company is facing a major decision. At this time, both of them have the right to vote. If both of them vote for a and B, because they share the same share, they can only negotiate and resolve the issue, because no one hasDecision-making power.

Here, another word, decision-making power, is derived from the right to vote. If two people share different shares, one is 40%, and the other is 60%, even though both of them have the right to vote, when one vote for a and one vote for B, the shares occupy the largest ownership of decision-making power.

Assume that the company is growing and has 10 people (shareholder 1 and shareholder 2 are also working in the company, not just holding shares and not doing things) after one year, there will be two problems:

1. Insufficient motivation: shareholder 1 and shareholder 2 have ownership of the company (distribution of interests and voting rights), whereas other 8 do not. Assuming that the company's net profit for the current year is 1 million, the other eight people can only receive the monthly fixed salary and the year-end bonus at the end of the year, which has nothing to do with them. When these benefits have nothing to do with them, there will be less motivation for them to work hard and get rich together, because they will get a fixed salary for doing more and doing less and getting slower.
2. The brain drain problem: among the eight people, there may be people with the ability to surpass shareholder 1 and shareholder 2. In addition to caring about the right to distribute profits, they usually want to be more involved in the company's decision-making, namely, voting and decision-making, because they can present their talents, and in this case they often leave.

Many problems of the company are actually caused by unfair distribution of interests: the company's right to distribute interests and voting rights belong to two shareholders of the shareholding, but the daily operation is completed by 10 people, if the operator cannot share more about the benefits of the company's growth, there will be a lack of motivation or even departure.

One way to solve this problem is to give more shares to employees, or at least give shares to middle-level cadres and potential talents. In this way, at least key figures in the company have their interest distribution and voting rights, start-up activities will be more energetic and have a sense of belonging to the company.

However, this will also cause problems:

1. The right to vote and decision-making is actually the control of the company. The more shares are given, the less control the Founder has on the company. Some of the company's founders made too many shares to raise more funds. As a result, they finally became migrant workers.
2. When giving up too many shares for middle-level cadres, in addition to reducing their control power, there may also be a struggle between internal departments of the company.

One way to solve the above problem is to separate the two attributes of the share: the right to distribute the interest, called the dividend stock, and the right to vote, called the original stock. At this time, the shares of the 10-person company may be like the following:

The two founders still hold 100% of the shares (original shares), but only share 60% of the benefits (dividend shares), and the remaining 40% share the shares with the employees (it doesn't matter if you share a lot of money to everyone, but the leadership is here for me ). Some employees may feel that they have been exploited again. Why not 40% of the founders and 60% of the other 8 employees? Because the money sent to these eight employees is basically consumed by food, drink, play, and wear, and most of the money the founder receives will continue to be invested in the company, make the dishes bigger and the cake bigger.

If the founder of the total profit continues to invest in the part of the company, it is separated separately, virtualized as a shareholder, the shareholder is called a "company ". Assume that the shares share ratio is 50%, then it becomes as follows:

It can be seen that the two founders actually spent the same or equivalent amount of money with their employees.

The above practice can solve the problem of insufficient motivation, but it still does not solve the problem of the brain drain, because some talents not only care about the amount of money they have, but also care about how much they can be used. At the same time, when the company grows up, the company's founder also needs talented people to participate in decision-making to avoid making mistakes. In addition, the voices of grass-roots personnel also need to be heard. Therefore, there isDiscourse PowerThe right to speak is what every employee should have. Everyone can make their own voices, and the management and founder should be able to hear these voices.

For the company's management, they should have the right to vote, but the decision-making power is temporarily in the hands of the founder (only need to increase the proportion of the founder's shares in the right to vote ). At this point, it is no longer important for the management to master the original stock. If the management has the original stock, it will have the capital and chips of the internal struggle. At this time, the original stock in the Founder's hand is only symbolic. Assuming that three of the other eight employees have the right to vote and each account for 15%, the shares can be constructed as follows:

At this time, although the original stock only has symbolic meaning, it represents control of the company, because the dividend shares and voting shares can be canceled, but the original shares cannot be canceled at will.

When the Founder is sure that he will not bring about an internal struggle, he may consider allocating the original stock to him.

When meeting the previous article and surpassing the founder, the decision-making power can be partially or completely delegated to him. At this point, if the company has a large scale, the Founder can retreat, as a comfortable shareholder; if the company is small, you can continue to work in the company.

Finally, let's talk about the company's valuation, that is, how much share capital the company has to share. I adopted a simple method:

A typical residential area in Shenzhen has a 75-level house with a monthly rent of 4500 and a price of 2.1 million. The annual profit of this House is 54 thousand yuan, and the ratio to the price of the house is: 1: 38.9.

According to this ratio, if a company creates a profit of 1 million a year, it is worth 38.9 million.

Of course, the bubble in the house is too big, the water is too high, cut off half, at as the proportion. If a company has a profit of 1 million a year, it is worth 20 million. Based on 1 unit and 1 unit, it can be divided into 20 million units.

In practice, it doesn't matter how much the company's valuation is based on. You only need to know the proportion of your dividend shares and the total profit, and then you can get the part of the money you deserve. Valuation is crucial in financing, because the amount of shares transferred in exchange for the amount of funds depends on the company's current profitability and future earnings expectations.

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