OK, let's try this another way.
Example: Company A is a private company seeking venture capital to get to a position where it starts selling product. The Founders/Owners own 100% of the private shares (yes, private companies can an do have "shares" allotted within their structure). At this time, they have 100 million private shares approved and ready to sell. Now, the owners meet with private investors/venture capital partners. The company sells 10 million shares in Round 1 of their private funding.
A bit later, Company A needs more cash. They sell 20 million more of the 100 million shares in Round 2.
By round three, they have sold 40 million more shares, so now the Founders own just 30% and the private investors own, collectively, 70%.
Now they are ready to go public, but the private investors are not allowed to sell their shares for at least 6 months after the IPO. Company A now offers 20% of the 100 million shares to the public in that IPO.
Here is the very important part: In Round 1, the private investors got their shares for 0.50 each. In Round 2, 0.75 each, and in Round 3, $1 each. The IPO is for $10 a share. The early investors make a killing, once they are finally allowed to sell. Some will sell, but many will hold on for the long term.
The public buys at $10 a share. So, now, the Founders own just 10% of Company A, the public owns 20%, and the rest is owned by a bunch of private investors.
So these bid, bad, evil private investors who own 70% of the Company can do big, bad, evil things to the retail shareholders, right? Because that's what they always do, right?
Wrong.
This is how it works with every private company that eventually goes public, including those big, giant ones like Google, Amazon, etc. The vast majority of these public companies is owned by institutional investors, whom, collectively, have "control."
Does that mean Google, Amazon, etc. retail investors got screwed, because nearly 70% of those companies are owned by big institutional investors?
No, this is how it works.
So try this: Think of Spectra7 Microsystems as a Private company that is about to IPO (Because, in fact, they went public way too soon). So, now, look at it for what it actually is... This little startup that needed all this cash sold the majority of its shares to private investors, and now it's finally ready to go public... BUT WITH ONE BIG, HUGE DIFFERENCE: YOU, the retail investor has the very rare chance to now purchase shares, right now, at the same price paid by these big, bad private investors (Minus warrants, of course, but you get the point). These shares, at 0.10, are what Venture Capital partners would normally pay. BUT YOU CAN GET THEM AT THE SAME PRICE FOR A LIMITED TIME.
Those big, bad private investors bought today because they expect a huge payout down the road (one normally reserved for post-IPO sales) BUT YOU GET TO BUY AT THAT PRICE TOO.
When this finally "IPO's" (starts selling 800G chips en masse) those big, bad private investors will make decisions; some will sell at ten-times profit, some will hold on. BUT YOU CAN DO THE SAME THING.
Yes, yes, I know, Spectra7 is down 99% and people "lost" money. But that's the past. First of all, you didn't lose money if you didn't sell, and if you buy more now, you cab actually still make a fine profit.
Do you see what just happened. In a very rare event in the history of retail stock investing, the regular guy, you and me, have the opportunity to buy shares in a tiny little "private" company for the same price as Venture Capital partners, and that "private" company is about to "go public" when 800G arrives around the corner.
I know some of you will STILL say "We got screwed," but then so did Ron Pasek, the Chairman of the Board, who bought in the several dollar range to the tune of Millions of hos own dollars. The difference is, HE JUST COMPENSATED FOR IT BY BUYING A TON MORE TODAY AT ROCK-BOTTOM PRICES.
The question is, WILL YOU?
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