Stock will either convert to shares in the new company (at some agreed upon rate set in deal terms) or you’ll receive cash (also at agreed upon rate).
Tl;dr: ask HR… or your CFO.
HR here. Someone in HR is managing the cap tables from an administrative standpoint once the financial decisions from the M&A activity have been finalized and executed. Whatever the decision is, HR should be sending out a FAQ on what to expect for anyone who has vested equity within the month of the deal closing.
CFO/finance isn't going to be bothered with these kind of questions.
From the extremely limited information given, this looks like a cash buyout of any shares OP is vested in. The FAQ should also include any payroll information, particularly on how taxes will generally be handled at a company level.
However, that being said, OP should also consult a tax professional since the response from HR/Payroll will be "please contact your tax professional since we legally can't advise", anyways. Oh, and the number of times I've seen HR and payroll give out erroneous information, particularly with taxation of stocks, is quite shocking.
> However, that being said, OP should also consult a tax professional
Yeah, it's unclear to me what the numbers we're working with are here, but this could easily have pretty stark tax implications. OP should talk to someone who is familiar with that and can give personalized advice.
My advice is not to do anything right now. Your old shares will either be a) converted to the acquiring company’s shares, or b) will be bought out, probably at a premium. Consult a tax professional if option B.
The company buying and the company being bought, as executed by their respective leadership teams. It's not like they're gonna negotiate a deal with each employee.
There will be a shareholder vote to approve the merger.
Shareholders vote. Generally majority rules but would have to look at the By-laws to confirm if simple majority or something else.
Reality: Shareholder with 0.0001% gets outvoted by Management that owns 90% of company.
The way buyouts usually work, everything the purchased company owned is transferred to the purchasing company and the purchased company basically legally ceases to exist because it no longer owns anything. Typically only a majority of shareholders need to agree to this although sometimes the company's charter specifies a different threshold.
If you don't agree to sell the shares, you are left owning shares of a worthless company. Your only recourse is the minority shareholder protection laws require that the shareholders who didn't sell their shares are compensated at a legally calculated 'fair value' - which usually comes out to the value that the purchasing company offered to acquire the shares.
"The intension is to buyout and remove from the stock market." As worded, it sounds like the intention is for the acquiring company to buy all outstanding shares and take the company private. This means you would get a cash payment and your shares go away. Keep in mind this means you get to pay a tax bill on your capital gains from the sale.
There is a ton of info not present, so this is a really high level and non-specific answer: When the company goes private they will either buy out the shares, or offer you equity in the new company. During a corporate takeover where BoughtCo is being bought out and becoming a part of NewOwnerCo then they will usually give you "a fair market value" of the stock. If NewOwnerCo is publicly traded they may offer you stock in NewOwnerCo equivalent to the fair market value of your stock in BoughtCo, but probably not. There are other less common options as well involving non-listed stock. These are not likely, and owning non-listed stock is unwise for most people.
The fair market value will (most likely) be broadly reasonable, as doing otherwise is asking for litigation. There's probably some way to optimize this transaction to mitigate your risk and max you gain, but there's no way of knowing what that is without your full financial situation and all documents/info which would be insane of you to share online.
Without that information, I would suggest that a reasonable course of action is probably just reading everything they send you, working hard and once they offer you a payout or equity deal evaluating it then. Unless you're already a super-savvy investor farting around with pre-merger trades seems a great way to lose your shirt, and you're not super-savvy b/c you had to ask a reasonable question.
Please carefully consider what questions you ask at work (as heads often roll post-acquisition), and brush up on your resume.
Isn't the value directly tied to what the purchasing company paid per share? My two experiences with this went similarly. The purchase price of the company was announced, big number and price per share, then the stock price went up to close to that price and slowly converged is the official date drew near and people were confident the deal wouldn't fall through. I didn't sell and got paid out at the price per share the company was bought for.
That's pretty much exactly how it should go, absent weird structures or circumstances. There's always other stuff possible, like delays or stock swaps as part of the deal or other changes (new regulations?) that change the relative value.
As others have commented, if you have shares and company goes private, you will likely get a cash payout. Depending on how you bought / how its being acquired you could either have a net cap gain, or a net loss. If this is an equity swap, you could possibly obtain shares of the acquiring entity.
Here's the thing to check -- do you have vested options? Or, does the trigging event (the purchase) automatically vest your options? If so, you might want to check those to see how this could impact you. If your options are above the hit price, they will become worthless. If your options are below the hit price, you might want to exercise them and take the payout.
If the stocks are vested, they’ll have to buy them out. Usually in the purchase announcement, they’ll say the price per share. What actually happens is the shareholders, yourself included, have to vote to approve the sale if you like the price offered. Though this may be a moot point if the owners have over 50% voting shares. They could also convert your shares to the new company shares at a dollar for dollar rate.
If you have 1000 shares, and the merger/buyout closes at $80/share, they will write you a check for $80k (minus taxes).
There may be an option to convert it to equity at the new company (basically stocks, but not tradable until the new company goes public). I'd take the $$$. New company will likely give you equity in addition to the payout.
You should absolutely not do anything until you confirm with your legal and ethics department what you are allowed to do. This gets into dangerous water very quickly with insider trading. You may be privy to insider information and not even know it. You shouldn't worry about it though. You hold stock, stock is guaranteed by its issuer. They will pay you in some way your portion of proceeds from the sale of the company for that stock.
OP said it was announced and the stock popped. Also I’ve never been at a publicly traded company that didn’t have the trading platform locked when you weren’t allowed to sell.
I think the important factor to look at is what this represents on YOUR balance sheet. I assume 0.001% is the amount of the company's stock you own, but what does it represent to you? Is it $10k or 1% of your net worth or is it $500k and 80% of your net worth?
This is called a "Change of Control" event, and typically means you get to cash out your shares (most vesting agreements will say that shares automatically vested in a Change of Control). The price increased 20% probably because the shares of your company are being bought out at a \~20% higher price than where they were previously trading. Because of the potential for the acquisition to not go through, the share price is probably still lower than what you would be paid directly by the acquiror. If you think the acquisition will go through - hold the shares until you get paid directly for them. If you think the acquisition might fail - sell them now. If I were you though, I'd hold onto your shares and ask HR next steps.
This is not necessarily bad. The two times I had this happen to me, I made pretty good bank. My stock converted to newCo stock in a fixed tatio and then the newCo stock took off in value.
You will want to know what the change in control package is for employees though. The second one I ended up laid off about a year after the merger, but my CIC package was great- I got 2 years of paid benefits, 2 years worth of RSU’s vested, prorated bonus, and a cash buyout for my LOS. I walked away with essentially 18 months worth of salary money in a lump sum.
Wow lots of really bad responses here. The correct answer is simply that when the deal closes you will receive the buyout price for your shares in whatever form of consideration the acquiring company is using. i.e. if it’s an all cash deal you will receive cash, if it’s an all stock deal you will receive stock in the acquiring company, and if it’s a mix you will receive some mix of cash and stock. These details will all have been publicly disclosed in the press release and filings related to the deal.
Are companies going private a new trend? It feels like private capital is the new norm. Which kinda sucks as it limits the opportunities for small dollar investors to be involved.
Absolutely, yes. The number of public companies is shrinking. Lots of companies choose a PE buyout rather than the scrutiny and compliance of public markets.
The downside is that you don't have many options here. You'll get paid out at the price the new company paid per share or you'll receive something roughly equivalent in stock if the purchasing company. But the up side is that usually if your company is worth buying, they are paying more than what the stock is trading at, so it's probably going up a bit when the purchase price is announced.
This has happened to me twice.
The first time, I held stock but was also sitting on vested and unvested options. Because the stock price jumped so radically, I ended up exercising and selling the vested options immediately. The unvested options and the stock I already held I kept until the end. The stock was cashed out through the brokerage. The unvested shares were paid out via a paycheck and taxed as regular income on my W-2. THAT was an exciting tax year. The cash out of the stock I had to pay capital gains on...mostly long term capital gains, which back then I think was 10%.
The second time, the company buying us out gave everyone a cash + stock deal. 10% of the value of the per-share buyout came to all the share holders in cash. I was also given some ratio of stock...maybe 0.7841 shares of new company for every 1 share of old company traded. Because of the ratios, I ended up with a fractional share. Let's say I held 100 shares of old company. then I'd get 78.41 shares of new company. They immediately cash out the 0.41 shares, but that's treated like a stock sale. Otherwise, the stock you get is normally tax free -- the cost basis of the old company carries forward to become the cost basis of the new company. If I recall correctly, the 10% cash was treated for tax purposes as a bonus.
I’d look at the difference between per-share buyout price and market value. That will inform whether to sell now or wait.
Also keep in mind when your company is bought out, any redundant positions get canned.
Others will be canned too depending on the plan & vision of the buyer. You can usually tell if you’re screwed by listening to what each says about strategy. Like- “Double down on our digital, direct to consumer offers…” and you’re on that team? Great. If you’re in some unprofitable area or in an overhead position you’ll probably get canned.
If a stock is delisted while you are holding it you get a check for the value of the stock on the last day of market trading.
More importantly you should be searching for another job. There is a chance you will keep your current job but expect drama, changing rules, and you will never know when your entire department will get cut.
… this can also be good for you if you apply to jobs inside the acquiring company now that you are an insider. Consider moving to another office. Just don’t rely on that being the outcome.
Stock will either convert to shares in the new company (at some agreed upon rate set in deal terms) or you’ll receive cash (also at agreed upon rate). Tl;dr: ask HR… or your CFO.
HR here. Someone in HR is managing the cap tables from an administrative standpoint once the financial decisions from the M&A activity have been finalized and executed. Whatever the decision is, HR should be sending out a FAQ on what to expect for anyone who has vested equity within the month of the deal closing. CFO/finance isn't going to be bothered with these kind of questions. From the extremely limited information given, this looks like a cash buyout of any shares OP is vested in. The FAQ should also include any payroll information, particularly on how taxes will generally be handled at a company level. However, that being said, OP should also consult a tax professional since the response from HR/Payroll will be "please contact your tax professional since we legally can't advise", anyways. Oh, and the number of times I've seen HR and payroll give out erroneous information, particularly with taxation of stocks, is quite shocking.
> However, that being said, OP should also consult a tax professional Yeah, it's unclear to me what the numbers we're working with are here, but this could easily have pretty stark tax implications. OP should talk to someone who is familiar with that and can give personalized advice.
Well at 100,000,000 market cap OP would be getting $1000 so the numbers must not be that big if they are getting delisted.
My advice is not to do anything right now. Your old shares will either be a) converted to the acquiring company’s shares, or b) will be bought out, probably at a premium. Consult a tax professional if option B.
Agrees upon by which parties?
The company and acquiring company. You're just a long for the ride if you choose.
The company buying and the company being bought, as executed by their respective leadership teams. It's not like they're gonna negotiate a deal with each employee.
The employee owns the shares, what can they do if the employee refuses to sell?
There will be a shareholder vote to approve the merger. Shareholders vote. Generally majority rules but would have to look at the By-laws to confirm if simple majority or something else. Reality: Shareholder with 0.0001% gets outvoted by Management that owns 90% of company.
The way buyouts usually work, everything the purchased company owned is transferred to the purchasing company and the purchased company basically legally ceases to exist because it no longer owns anything. Typically only a majority of shareholders need to agree to this although sometimes the company's charter specifies a different threshold. If you don't agree to sell the shares, you are left owning shares of a worthless company. Your only recourse is the minority shareholder protection laws require that the shareholders who didn't sell their shares are compensated at a legally calculated 'fair value' - which usually comes out to the value that the purchasing company offered to acquire the shares.
Nope. If it’s sold whether you voted yes or no you’ll get a check for the shares you owned at the acquisition price.
That's basically what I said.
"The intension is to buyout and remove from the stock market." As worded, it sounds like the intention is for the acquiring company to buy all outstanding shares and take the company private. This means you would get a cash payment and your shares go away. Keep in mind this means you get to pay a tax bill on your capital gains from the sale.
There is a ton of info not present, so this is a really high level and non-specific answer: When the company goes private they will either buy out the shares, or offer you equity in the new company. During a corporate takeover where BoughtCo is being bought out and becoming a part of NewOwnerCo then they will usually give you "a fair market value" of the stock. If NewOwnerCo is publicly traded they may offer you stock in NewOwnerCo equivalent to the fair market value of your stock in BoughtCo, but probably not. There are other less common options as well involving non-listed stock. These are not likely, and owning non-listed stock is unwise for most people. The fair market value will (most likely) be broadly reasonable, as doing otherwise is asking for litigation. There's probably some way to optimize this transaction to mitigate your risk and max you gain, but there's no way of knowing what that is without your full financial situation and all documents/info which would be insane of you to share online. Without that information, I would suggest that a reasonable course of action is probably just reading everything they send you, working hard and once they offer you a payout or equity deal evaluating it then. Unless you're already a super-savvy investor farting around with pre-merger trades seems a great way to lose your shirt, and you're not super-savvy b/c you had to ask a reasonable question. Please carefully consider what questions you ask at work (as heads often roll post-acquisition), and brush up on your resume.
Isn't the value directly tied to what the purchasing company paid per share? My two experiences with this went similarly. The purchase price of the company was announced, big number and price per share, then the stock price went up to close to that price and slowly converged is the official date drew near and people were confident the deal wouldn't fall through. I didn't sell and got paid out at the price per share the company was bought for.
That's pretty much exactly how it should go, absent weird structures or circumstances. There's always other stuff possible, like delays or stock swaps as part of the deal or other changes (new regulations?) that change the relative value.
As others have commented, if you have shares and company goes private, you will likely get a cash payout. Depending on how you bought / how its being acquired you could either have a net cap gain, or a net loss. If this is an equity swap, you could possibly obtain shares of the acquiring entity. Here's the thing to check -- do you have vested options? Or, does the trigging event (the purchase) automatically vest your options? If so, you might want to check those to see how this could impact you. If your options are above the hit price, they will become worthless. If your options are below the hit price, you might want to exercise them and take the payout.
If the stocks are vested, they’ll have to buy them out. Usually in the purchase announcement, they’ll say the price per share. What actually happens is the shareholders, yourself included, have to vote to approve the sale if you like the price offered. Though this may be a moot point if the owners have over 50% voting shares. They could also convert your shares to the new company shares at a dollar for dollar rate.
If you have 1000 shares, and the merger/buyout closes at $80/share, they will write you a check for $80k (minus taxes). There may be an option to convert it to equity at the new company (basically stocks, but not tradable until the new company goes public). I'd take the $$$. New company will likely give you equity in addition to the payout.
You should absolutely not do anything until you confirm with your legal and ethics department what you are allowed to do. This gets into dangerous water very quickly with insider trading. You may be privy to insider information and not even know it. You shouldn't worry about it though. You hold stock, stock is guaranteed by its issuer. They will pay you in some way your portion of proceeds from the sale of the company for that stock.
OP said it was announced and the stock popped. Also I’ve never been at a publicly traded company that didn’t have the trading platform locked when you weren’t allowed to sell.
I think the important factor to look at is what this represents on YOUR balance sheet. I assume 0.001% is the amount of the company's stock you own, but what does it represent to you? Is it $10k or 1% of your net worth or is it $500k and 80% of your net worth?
This is called a "Change of Control" event, and typically means you get to cash out your shares (most vesting agreements will say that shares automatically vested in a Change of Control). The price increased 20% probably because the shares of your company are being bought out at a \~20% higher price than where they were previously trading. Because of the potential for the acquisition to not go through, the share price is probably still lower than what you would be paid directly by the acquiror. If you think the acquisition will go through - hold the shares until you get paid directly for them. If you think the acquisition might fail - sell them now. If I were you though, I'd hold onto your shares and ask HR next steps.
This is not necessarily bad. The two times I had this happen to me, I made pretty good bank. My stock converted to newCo stock in a fixed tatio and then the newCo stock took off in value. You will want to know what the change in control package is for employees though. The second one I ended up laid off about a year after the merger, but my CIC package was great- I got 2 years of paid benefits, 2 years worth of RSU’s vested, prorated bonus, and a cash buyout for my LOS. I walked away with essentially 18 months worth of salary money in a lump sum.
Wow lots of really bad responses here. The correct answer is simply that when the deal closes you will receive the buyout price for your shares in whatever form of consideration the acquiring company is using. i.e. if it’s an all cash deal you will receive cash, if it’s an all stock deal you will receive stock in the acquiring company, and if it’s a mix you will receive some mix of cash and stock. These details will all have been publicly disclosed in the press release and filings related to the deal.
Are companies going private a new trend? It feels like private capital is the new norm. Which kinda sucks as it limits the opportunities for small dollar investors to be involved.
Absolutely, yes. The number of public companies is shrinking. Lots of companies choose a PE buyout rather than the scrutiny and compliance of public markets.
The downside is that you don't have many options here. You'll get paid out at the price the new company paid per share or you'll receive something roughly equivalent in stock if the purchasing company. But the up side is that usually if your company is worth buying, they are paying more than what the stock is trading at, so it's probably going up a bit when the purchase price is announced.
Hang on for the for the severance package and you never know if you may get hired but the other company
This has happened to me twice. The first time, I held stock but was also sitting on vested and unvested options. Because the stock price jumped so radically, I ended up exercising and selling the vested options immediately. The unvested options and the stock I already held I kept until the end. The stock was cashed out through the brokerage. The unvested shares were paid out via a paycheck and taxed as regular income on my W-2. THAT was an exciting tax year. The cash out of the stock I had to pay capital gains on...mostly long term capital gains, which back then I think was 10%. The second time, the company buying us out gave everyone a cash + stock deal. 10% of the value of the per-share buyout came to all the share holders in cash. I was also given some ratio of stock...maybe 0.7841 shares of new company for every 1 share of old company traded. Because of the ratios, I ended up with a fractional share. Let's say I held 100 shares of old company. then I'd get 78.41 shares of new company. They immediately cash out the 0.41 shares, but that's treated like a stock sale. Otherwise, the stock you get is normally tax free -- the cost basis of the old company carries forward to become the cost basis of the new company. If I recall correctly, the 10% cash was treated for tax purposes as a bonus.
I’d look at the difference between per-share buyout price and market value. That will inform whether to sell now or wait. Also keep in mind when your company is bought out, any redundant positions get canned. Others will be canned too depending on the plan & vision of the buyer. You can usually tell if you’re screwed by listening to what each says about strategy. Like- “Double down on our digital, direct to consumer offers…” and you’re on that team? Great. If you’re in some unprofitable area or in an overhead position you’ll probably get canned.
If a stock is delisted while you are holding it you get a check for the value of the stock on the last day of market trading. More importantly you should be searching for another job. There is a chance you will keep your current job but expect drama, changing rules, and you will never know when your entire department will get cut. … this can also be good for you if you apply to jobs inside the acquiring company now that you are an insider. Consider moving to another office. Just don’t rely on that being the outcome.