Need stock advice

suzuki2000

suzuki2000

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To start off, I am not stock savvy at all...

So I got a package in the amil yesterday, many year ago I was with a company that I received some stock options. While I was there a few thousand shares vested, worth practically nothing at the time. Was always the joke it was my retirement for when the company went IPO.

So the company is being sold, majority group of shareholders with 90%+ of the stock have signed off to sell. Offer of sale is substaintially higher then what I paid, but in real $'s it is only worth just over a thousand to me. I really have no interest in selling and the shares could just sit for all I care. Reading all the legalese of the docs they sent to me, the proposed seller is intent on purchasing all the outstanding shares.

What happens if I do not sign back to sell? Are my shares at risk? The dollar value isn't really that big, so I prefer not to need to incur an expense of a finanial guru, so i turn to you keyboard cowboys. With the collective braintrust that roams around here I figure I may be able to get some good opinions
 
I don't think you need a financial guru. I figure since you don't have the shares in your own trading account that you just follow the paperwork they've sent you and expect a cheque in the mail.

A couple years ago I had shares in a company that was sold but because the shares were in my trading account, I just sold them on the market and walked away with the dough.

In your situation, the sale looks like a done deal so it will probably take some time to officially close the deal but you should be getting paid eventually. I am not exactly sure what the process is like going through paper but I figure as long as you do what the paperwork says you should do (provided its reasonable), you should get paid out. They are not going to just cancel your shares and move on because they don't think you're looking... They can get into trouble for doing that.
 
I presume you meant to say that the proposed BUYER wants to purchase all of the outstanding shares and pay them off in cash.

Normally, in takeover situations, if you own shares of the company being taken over, the best course of action is to sell those shares very shortly after the news hits the wire. The reason is that the shares will normally spike to the takeover price and pretty much stay there ... unless something goes bad in the deal, which can happen and does happen from time to time. If you sold shortly after the news became public then your profit is locked in and it doesn't matter if the deal goes sour after that. The only time the share price would ever go above the offer price is if the market expects a bidding war for the company, which does not appear to be your situation, and even then, IF that happens, the best course of action is still SELL.

Failing that, if you do nothing, and if there is a huge majority shareholder after this sort of deal is complete, you normally don't want to be the little guy on the side. It's possible that so few shares will be left outstanding that they will be hard to trade.

Nutshell summary ... SELL. Or, sign off on the deal and let them pay you out in cash. Go with the flow.
 
I think this company is not yet trading i.e. it's a privately held company.

If you don't sell to the BUYER either:
- you never get another offer to buy, ever, since he doesn't need your shares to control the company
- he pays you tons more to buy since he doesn't want the complication of a minority shareholder
- the company IPOs at greater price.

Just selling to the BUYER is the least risk. Otherwise if you say no now, you should kiss the current stock value goodbye, and hope for a very very lucky break and a windfall many years away.
 
Johnp, this is a private company.

do I expect that there is some pot of gold at the end of the rainbow? not really. I cash out now and make about $1300 before taxes or hold on and maybe the comopany does soemthing spectacular in the future.

My investment cash out of pocket was less then 25 cents, I only had a quarter on me, but never asked for change

My ROI is pretty impressive as a percentage, Is a little over $1k life altering,... not really
Do I really need the money right now?
... not really,
...is there risk if I hold on, that's what I was looking to better understand.

No matter which way I go, this investment has faired better then any lottery ticket I have ever purchased.

The adventurous :rolleyes: side of me trends toward the "hold and maybe they do IPO" in another 20 years?
 
suzuki2000 said:
........is there risk if I hold on, that's what I was looking to better understand.......
Click to expand...

Only risk is that you never get the chance to sell it again, i.e. it goes to zero.

Nothing else bad can happen to you if you keep it. Common stock is limited liability so the shares can never be worth less than zero i.e. it's not like you will ever have to pony up some more cash.
 
What is your own feeling about whether this company would ever go public and what is your own feeling about the growth rate of this business?

Is it growing at a decent rate in a capital-intensive or investment-intensive business? That would favour a decision to go public at some point (to raise cash to fund further business development - or to allow the original owners, yourself included, to cash out).

Just because a company goes public doesn't mean the IPO will be successful. Also, if the company is being bought out by another one, if the company that eventually goes public is a different business entity from the one that you own shares in (which is likely! given that the company you own shares in is getting bought out), your shares could still end up being worthless.

The probability of a successful IPO of the exact same business entity (after having been bought out by someone else and then subsequently split off???), possibly years down the road, at a higher price than what you can sell the shares for now, I would say is very remote. It is more likely that the company taking over the one you own shares in, won't need to buy all of the shares in order to have control of it, and won't be interested in buying your shares later on.

It is very risky to own shares in a privately-held company - much, much riskier than owning shares in a publicly-traded company. You want to sell your shares? Ahh, but we're not interested in buying your shares - we'll give you $1 for each one. Oh but you want to BUY IN? Ahh, nobody is allowed to buy their way into the inner circle. But for the right price, perhaps one of the private owners might wish to sell one or two shares for $1000 each ... The "bid" and "ask" prices for a publicly traded company tend to be much closer together, generally pennies apart.

SELL. Sign off on the deal, take the money and run.
 
I'm too tired to type a lot but what Brian P says is how I understand the situation. Minority shares in a private company can be worthless. Without the financial clout to stop them the majority shareholder can redirect profits any way they want or just bleed the company dry of patents, client lists etc. to fatten another cow.
 
^ not quite. Minority shareholders can't be abused by majority shareholders either. You can't declare dividends that are only payable to the majority shareholders for example - all shareholders of same class have to get the same.

So there's an off chance that <suzuki2000> could get a better deal than the shareholders that grab the current offer. Say there's many people that are offered the same deal as <suzuki2000>; they all grab the deal and the only holdout is <suzuki2000>. If majority want to do weird stuff but can't because of the <suzuki2000> holdout, they can now afford to offer him twice as much to shake him loose - since there's not many shares they have to buy. But this is a long shot.

Point is that there are laws to protect the minority shareholder, of course time consuming and difficult to enforce.

EDIT: But don't get me wrong. I agree with the other guys' recommendations and would sell.
 
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With all due respect to the knowledgeable people here, this is not the place to ask your questions. Speak with a professional.
 
Interesting.

I don't really want to get into the specifics of private company ownership, because that is a ****ing textbook. but I do a lot of these kind of deals.

Personally. I don't believe in holding private company shares unless
(a) I believe in management (private company shares are ALL about trust)
(b) I expect an exit ( by that I mean going public ); or
(c) I have a hammer ( meaning a large stake with some board seats ).


I wouldn't worry too much a bout getting abused, from what it sounds like, your stake is so small that there is no point actually trying to cut our your profits ( it can be done, and its expensive to fight it, much more than your whole stake).

What you worry about is not redirection of profits, its not dividends, that whole classes of shares stuff is true, but completely worthless information.
What you worry about is DILUTION. Meaning, the controlling stakeholder continuously issues shares, and your stake just slowly becomes smaller... and smaller... and smaller...

Anyway, there is lots more I can say, but this is all I intend to post on this.
 
wormburner said:
With all due respect to the knowledgeable people here, this is not the place to ask your questions. Speak with a professional.
Click to expand...

for a 1300 dollar stake in a company? lol
 
Think as most say just sell it off and invest that $1300 into something. I'd bet that $1300 invested into something for 20 years will grow more than holding onto that stock 20 years from now.
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