I see news that says "company X wants to raise 3 million dollars at a valuation of 25 million dollars". How does the company get this 3 million? And is the valuation determined in part by how much many it wants to raise? If so: how?
Asked
Active
Viewed 1,851 times
1 Answers
12
A company generally sells a portion of its ownership in an IPO, with existing investors retaining some ownership. In your example, they believe that the entire company is worth $25MM, so in order to raise $3MM it is issuing stock representing 12% of the ownership stake (3/25), which dilutes some or all of the existing stockholders' claims.
D Stanley
- 145,656
- 20
- 333
- 404