How to dilute stocks?

Question

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Surely all of you have watched the movie "The Social Network". Can you tell me how Zuckerberg "diluted" the shares of one of the co-founders of the project without touching the shares of others when new investors were attracted? Does anyone know if this is legal from a legal point of view?

Answer 1

For example, your garage company has only 100 shares of $1 and 4 co-founders of 25 shares each.
And then one day you agreed with an investor who invests $1,000 in you for 10% of the company. Those. he valued your company already at $10k.
You issue 9900 shares at $1 and give the investor his 1000 shares.
You have 8900 shares left, which you divide equally between yourself and two "good" co-founders: 2968 for yourself and 2866 for those two.
The fourth, "bad" co-founder cuckoos with his initial 25 shares, which went from 1/4 of the company to 0.25%.
The legality of this, probably, is determined by the agreement: if there is no agreement obliging to coordinate the issue of new shares with the “bad” co-founder, then he is not owed anything. My answer does not pretend to be competent in covering the legal side of the issue.
Upd. Comment by lawyer Maxim Shishkin :

The decision on an additional issue of shares is made at a general meeting of shareholders, where it is stated what happens to the newly issued shares - whether they are distributed among existing shareholders or by subscription or conversion into shares of securities. In addition, new shares must be paid. That is, to deceive a person who, among others, decides on an additional issue of shares is very strange.
The main working case of leveling the opinion of a particular shareholder for Russia is to consolidate a controlling stake in the same hands or in the hands of the beneficiaries.