tech-company, equity, investmentSomewhere I came to know the term Immutable Share which means that the share that is not diluted when new investors comes.
For example, lets A, B, C and D starts a company with owning 25% share each. Say 40% of the share of D is Immutable. Now a new investor comes and invest a big amount for 20% of the total company share. Again, (250.4=)10% share remains to D as it is Immutable. The rest 70% share is then distributed to A,B,C and D each getting A, B and C each (70.25=)17.5% shares and D (70*.15=)10.5% shares.
Thus A,B,C get 17.5% shares but D still gets (10% + 10.5% = )20.5% shares as he has 40% of his shares immutable.
The same calculation applies to when any further investors come.
This is a raw concept I can picture out. How is this represented in Business Studies? Can anyone give some real world examples or case studies regarding this?
One way to achieve what you’re talking about is possibly to create different classes of shares with a set limitation on the total number of each class that can/will ever be issued. In such a scenario, investors in later rounds would receive some share of a class of stock created for that funding round, leaving the shares of other classes undiluted.
All content is licensed under CC BY-SA 3.0.