If you keep giving shares away, won't that devalue my own shares?
As we issue more shares to other members, the percentage of the company you own will decrease. But that is not necessarily a bad thing for you!
imutual's policy is to issue shares in a consistent manner, in proportion to the value that a member's actions are adding to the company.
If you agree that we are doing that, then at worst the issuing of more shares has a neutral effect on the value of your existing shareholding. Because the company's value increases in proportion to the shares being issued
But we actually think that your shares will increase in value as we distribute more shares. Let us explain...
In the world of corporate acquisitions, company's tend to attract a higher 'multiple' if they are 'big' and 'growing' (excuse the simplistic terms). Take the 'big' point first:
An investor wants to purchase a cashback website and has a choice between company A (membership of 100,000) and company B (membership of 1,000,000). Assuming both companies generate similar revenue-per-member, you might assume that company B ought to be worth ten times more than company A. Not so - it will be worth much more than ten times the value of company B, all other things remaining equal. That's because the investor knows that the "1m person membership" of company B offers much greater opportunities; go to a retailer and say "what can you offer our 1m members?" and you get a much better response than if you say "what can you offer our 100,000 members?". Also, there is always a 'market leader' premium; investors in companies such as ours generally want to buy 'winners' and then consolidate that position, not buy a company in 2nd or 3rd place and take on the difficult task of overtaking an establish leader. Finally, going through the process of an acquisition is costly and time-consuming, and a company needs to be of a certain size to make the whole exercise worthwhile for the buyer.
Investors also like to see that a site is growing. Continuing to attract members via the share offer makes imutual more attractive, because it demonstrates its 'potential' to keep increasing in size and value.
The bottom line, size IS (almost) everything. As imutual becomes bigger, the likelihood of someone wanting to buy us will increase, as will the amount-per-member they are likely to offer. So, it's important to understand that you benefit from growth of the site, even though it reduces your % shareholding.