Capitalization Change

This has nothing to do with Caps Lock or changing your Twitter handle.

This has everything to do with how a company’s ownership and capital structure changes as it grows over time.

Think about Facebook for a minute. It started with Mark Zuckerberg and his friends operating out of a dorm. You watched the movie The Social Network. They had a little bit of cash, and they divided the ownership among a few people.

But then they grew and it started to show financial promise. Venture capital funds got interested. They bought in, trading their cash stash for partial equity ownership in ticker: FB. In doing so, they needed the founders to accept a capitalization change...a process that changes equity ownership distribution in the firm and its ownership structure.

Keeping it simple: New sources and forms of capital lead to a capitalization change.