It doesn't require selling 50%. You can sell less than 50% of your company and still have the board majority controlled by investors, because those were the terms of the preferred investment.
Stock isn't money. If you owned 50% of the shares of Google you couldn't easily turn it into 50% of Google's market cap. You might be able to turn it into 45%, but the price right now is the price at the margins to buy ~1 share from someone who is willing to sell one share. If you tried to sell half, you would find radically less people are interested at that price then you would need to sell all of your portfolio.
Don't get hung up on 51%, or 50%+1 share. Not all shares are equal. A company can issue a single voting share and 99 non-voting shares, and that gives the owner of the 1 voting share complete control despite only owning 1%. It's much more complicated than any simple example can illustrate.
To answer the question though, founders sell equity to raise money. When you've sold 50% the next time you raise (or give stock to a new employee, or reward a mentor, etc..) means you're going to own less than half the company you started.
If I'm a founder and I own 100% then give up half the company to investors, that 50% I give up better improve my overall outcome by at least 2x. Usually that's reflected in the overall valuation.
But you have to remember scale here. He is selling just over 5% of his stock. I think it is a good idea to follow the founders, so yes go sell your stock (or at least 5% of it).
For goodness sake, take some damn profit! Sell 15%, 30%, or 50% -- whatever you want. It will be good for you and you will feel better after you do it :) It's good mental training to be able to sell a piece of your holdings.
You will still have skin in the game. You can still still keep tabs on new developments. But you will also have a more balanced portfolio.
At 50% it might be easier to just buy up shares on the market til they have a controlling share. The number to do that sets a cap on what the buyer will pay. I don’t have numbers on-hand, but trying to move a majority of a company’s stock (buy or sell) can cause crazy swings. When I worked in hedge funds, it was a thing we worked around. Our larger trades would execute over the course of a day or several days to minimize our impact on pricing.
At 10%, many shareholders will feel that their risk-adjusted returns on the stock would do better than the buyout.
30% is likely below the costs to acquire a controlling share on the market, and above any reasonable belief in risk-adjusted returns for shareholders (barring exceptional companies).
A lot of it is wishy washy because it’s based on math, but math with presumptions baked in. How much do shareholders think their stocks are worth? How much would it cost to buy them on the open market? How much does the buyer think the stocks are worth? There are approximate answers to all of these, from which an even more approximate price needs to be determined.
Because to investors, 10-16% shows you’re cutting fat. 25% or more shows you’re cutting off limbs and the firm is in distress. If I owned the second I would probably look to sell it.
Selling 10% regardless of price is the logical and rational decision for any employee with a meaningful stake. If you have 6 or 7+ figure into the stock, slowly diversifying is the only sound thing to do, even if you still strongly believe in the company.
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