WEBVTT 00:00.240 --> 00:03.840 Hi, welcome to lesson number four, Equity management features. 00:04.160 --> 00:07.760 So in this lesson I want to explain which features we want to focus 00:07.920 --> 00:12.040 during this course, especially in the development phase, how they work 00:12.540 --> 00:16.480 and why they are important. So let's go to the drawing 00:16.980 --> 00:18.640 board to explain how these features work. 00:21.680 --> 00:25.280 So we have, we have our 00:25.780 --> 00:29.120 the initial state in the equity management when you 00:29.620 --> 00:33.440 don't have any shareholders, so they don't own anything. In your company you 00:33.940 --> 00:38.040 have an owner who owns 100% and you have a company with zero evaluation 00:38.540 --> 00:42.160 and zero amount of stocks available. So the first event is the 00:42.660 --> 00:46.680 capitalization. So the capitalization in this specific simplified case 00:47.180 --> 00:50.920 is a one time event. Somebody will offer some money or 00:51.000 --> 00:54.600 propose a funding for your company and to become valuable. 00:54.920 --> 00:58.360 So let's say you have a shareholder who propose 10k 00:58.860 --> 01:02.840 euro for 10% of your company and the owner will own 90% 01:03.080 --> 01:07.480 left of the company. And that would impact overall 01:07.720 --> 01:11.280 evaluation to becoming 100k instead of 01:11.780 --> 01:15.720 0. Why? Because if 10% costs 10k would 01:16.220 --> 01:19.980 mean that the 100% of company would be 100k. The stocks 01:20.480 --> 01:24.380 I still stand at 0 because currently we're just talking about the evaluation in 01:24.880 --> 01:28.980 general in relative percentages. I just want to note that in real 01:29.480 --> 01:32.780 life scenario most probably 10% will convert to some kind 01:33.280 --> 01:36.420 of stocks. But we will discuss it in our next event. 01:36.900 --> 01:39.620 So the next event would be initial shares release. 01:39.860 --> 01:43.060 It's also a one time event, at least in our specific 01:43.140 --> 01:46.510 app development. So how does it work? 01:46.670 --> 01:50.430 You have a company which 01:50.930 --> 01:53.710 wants to be available on the market. In order for that to be available, 01:53.790 --> 01:56.990 you need to have some kind of initial shares release. In this 01:57.490 --> 02:00.910 case, let's say we release 10k of shares into the market which would 02:01.410 --> 02:04.750 represent 100% of the company. So what that would 02:05.250 --> 02:08.750 mean is that our owner who owns 90% will 02:09.250 --> 02:12.990 now own 9k of shares and the shareholder 02:13.490 --> 02:17.030 who bought initial 10% of the company would be 02:17.530 --> 02:21.190 worth of 1k shares. The owner will have 9k. The shareholders 02:21.690 --> 02:24.830 will have 1k. Overall amount of shares is 10k for now. 02:25.470 --> 02:28.990 So the next is the share split event. So the share split 02:29.490 --> 02:34.110 event is an event when the company, for various reasons like decrease 02:34.610 --> 02:38.680 the share price or make the shares more liquid, decides to 02:39.180 --> 02:42.560 increase amount of shares. And they do it by applying a 02:43.060 --> 02:46.240 certain split factor to your shares. 02:46.320 --> 02:49.520 So let's say our company and now stands at the valuation of 100k. 02:49.760 --> 02:53.080 The stocks of the company are 10k. So if we run the 02:53.580 --> 02:57.320 share split with the split factor of 2, that would essentially mean that we 02:57.820 --> 03:01.880 have 10k stocks multiplied by split factor of 2 which would 03:02.380 --> 03:06.150 mean now we stand at 20k. The amount of 03:06.650 --> 03:10.550 shares available for the owner and shareholder are now different. Instead of 9k 03:11.050 --> 03:14.750 for owner it would be 18k and for the shareholder it would be 2k 03:15.250 --> 03:18.470 instead of 1k. So last but not least is 03:18.970 --> 03:23.190 the shares purchase. So let's say you can buy or sell stocks 03:23.690 --> 03:26.630 in the market in real life scenarios. So we want to do the same here. 03:26.950 --> 03:31.050 Let's say our shareholder want to buy 1k of shares 03:31.550 --> 03:34.970 from the market. That would essentially mean that his stake at the company increased 03:35.470 --> 03:38.770 from 10 to 15% and the amount of stocks will increase from 2k 03:39.270 --> 03:42.330 to 3k. So that's all what we have right now. 03:42.410 --> 03:46.010 So if you want to repeat all of them, we have capitalization which is 03:46.510 --> 03:49.530 one time event. We have initial shares release which is one time event. 03:49.770 --> 03:52.930 We have a share split which is increase amount 03:53.430 --> 03:57.130 of the shares. And also we will have a shares purchase which would mean buying 03:57.630 --> 04:00.890 or selling a stake of the company and increasing or decreasing amount of stakes. 04:01.920 --> 04:04.560 Thank you and see you in the development section.