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I see news that says "company X wants to raise 3 million dollars at a valuation of 25 million dollars". How does the company get this 3 million? And is the valuation determined in part by how much many it wants to raise? If so: how?

Adam
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1 Answers1

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A company generally sells a portion of its ownership in an IPO, with existing investors retaining some ownership. In your example, they believe that the entire company is worth $25MM, so in order to raise $3MM it is issuing stock representing 12% of the ownership stake (3/25), which dilutes some or all of the existing stockholders' claims.

D Stanley
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