Number of Shares

Who and how do we decide the number of shares while going public? Let's say I want to dilute 50% of my company, how do I come up with the number of shares to divide that 50%?

1 Answer(s)


According to me, when a company wants to scale up and decides to do an IPO then it has to come up with projected amount to be raised and shares involved while hiring an Investment bank. After that underwriter goes through due diligence of the company and reflects all the information about shares issued and amount to be raised on memorandum. Obviously, if a company decides to issue more shares in an IPO than it has to dilute the ownership of the existing owners and no owners wants to get its ownership to be highly diluted. So, it's all decided in a board meeting of how much shares to be issued.
Dilution comes from EPS i.e. Net Earnings- Preferred Dividends/Outstanding shares, so if you will issue more shares than you will face more dilution in your earnings.