Question: When a firm needed to raise capital to expand the

When a firm needed to raise capital to expand, the founder was concerned about losing control of the firm if he sold too many shares. The solution devised by his investment banker was to create two different classes of shares. The founding member would retain 250,000 class A shares, which are entitled to two votes apiece; 750,000 common shares with one vote would be sold to the IPO investors. What percentage of the company’s equity will the founder own?
How much control (percentage of the votes) will the founder maintain?

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  • CreatedFebruary 25, 2015
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