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Batch1.5 MISHU Shareholder 4

Shareholders And What Role They Play In Your Company

Yes, you’ve seen it right!

This misspelling is a clever play from Elon Musk’s side in a poll he launched to ask the users of the famous social media, Twitter if they would like to have an edit function for the tweets they’ve posted. The mistype by him is intended to show an example of why the edit function is required for the tweets made.

The poll is met with immense response from the public, or to be specific, a total of 4.4 million people took part in voting. The poll ended up with the result of 73.6% of the voters agreeing to see an edit function while the other 26.4% were against it. Due to the popularity of the tweet, this poll was then retweeted by the CEO of the company, Parag Agrawal who urges people to vote carefully as the consequences will be severe. At the time of writing this article, Twitter has already announced that they are working on the edit function while denying it had anything to do with Musk himself.

As you may have heard the news, Elon Musk is now the largest shareholder of Twitter as he has bought 9.2% of Twitter’s shares, ultimately causing a 27% spike in the company’s shares.  So, what does this mean and why does Elon Musk have the power to implement a new feature in this social media platform used by millions of people around the world? Now that you’ve understood the sheer power that a shareholder has, we will need to first understand what a shareholder is.

What is a shareholder?

Firstly, what’s a share?

Sometimes known as equity or stocks, shareholders are those who have provided financial resources or money at the creation of the company in exchange for a ‘share’ or ‘control’ of the company. So, if 5 individuals have funded a company equally, all of them would have a total of 20% of shares in the new company. In another scenario, imagine your business as a whole pizza. One day, someone came to your doorstep and said he wanted to buy your business. After you let him know the price, the buyer admits that he does not have enough money to buy your whole business or pizza. Instead, the buyer suggests buying one slice of your pizza. So, if you’ve split the pizza (or your business) into 10 perfect slices, and he buys one slice of that, then he will have 10% of your pizza. In other terms, he is a shareholder with 10% of your business’s share!

The power of a shareholder

So, say you’re now a shareholder of Amazon, one of the largest businesses in the world. As a shareholder, can you use your minuscule portion of share and barge into the company demanding employees there to work for you? Would Amazon listen only to you? The answer is no, you can’t do that! For starters, the share you own is just a fraction of the whole company. So, why would Amazon waste its time? With that said, as a shareholder, you only have limited rights. These rights include receiving dividends, voting on directors, taking part in the company and annual meetings, and selling shares. Of course, the weight of your votes is mostly judged based on the number of shares of a company you hold, so don’t expect to make a splash like how Elon Musk did with Twitter!

You might be wondering: if Elon Musk is just a mere shareholder, why does he have the authority and the audacity to ask if the Twitter users want a specific function? Putting his personality and memes aside, as said, he is now the largest shareholder on Twitter and most importantly he has been appointed and invited into the board of directors. So yes, he does have the power to do so. Still, in the end, according to Parag’s latest tweet, it seems that Elon Musk will not be joining the board due to reasons unspoken.

What happens if a shareholder leaves a company?

It all depends on the contract or agreement that is signed between the company and the shareholder. A shareholder may sell its shares to other shareholders or to the public if it’s a listed company.  On the other hand, for a typical partnership business, when a partner chooses to leave the business, it may lead to the conclusion of dissolving a company or transferring their share, which again depends on the contract or agreement signed when the business is first created.

So now you have a basic understanding of what a shareholder is, are you ready to start your entrepreneur journey? Do you already have someone who is willing to be your shareholder and fund your dream? Let us know what’s on your mind! Hit us up or message us so we can help you make your entrepreneur path easier and clearer!

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