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The valuation of the company and the waterfall of the payment are two separate things. Presumably this was the highest valuation they could have gotten (no reas

The valuation of the company and the waterfall of the payment are two separate things. Presumably this was the highest valuation they could have gotten (no reason not to believe it given that it was a distressed sale). And the tax on the common stock the employees received when they exercised their options was based on the valuation of the common stock - so the tax system did correctly handle that.

BlewisJS 11y ago
The article states that 6 months earlier, the board turned down a potential sale valued at double the eventual sale price.
- tvladeck 11y ago
  This would be relevant only if the better opportunity was contemporaneous with the one Good accepted. As you mentioned, that opportunity was six months' gone.
jameshart 11y ago
They're not separate. The valuation of a thing is dependent on how much money the owners of that thing are willing to accept for it. The common stock holders' interests were poorly represented in the price negotiation. The decision to structure stock ownership in that way is, again, entirely the company's, not the tax system's. Sure, employees share some responsibility for accepting compensation that includes stock which can be sold on your behalf without your having any say in the price you're willing to take... but companies choose to offer comp packages which include that kind of stock precisely because it's hard for employees to value, and it's easy for employees to overvalue.
- tvladeck 11y ago
  > The common stock holders' interests were poorly represented in the price negotiation. You're mistaken here. Your point rests on there being a possibility that Blackberry paid the same amount for the company (the valuation), but common stock holders got more (the waterfall). This was not possible.
  - jameshart 11y ago
    But the people negotiating the deal with Blackberry knew how the waterfall would shake out. They elected to agree to a price where the share of the purchase price distributed across common stockholders left many employees in a bad place. That was a choice. As was structuring the ownership of the company, and the compensation offers to their employees, in that way in the first place.
    - tvladeck 11y ago
      Right, but we have to assume that Good could not have gotten a better price from Blackberry. The alternative was even worse from the common shareholders - a price of $0 for their shares. They also could not have changed the waterfall. So I'm not sure what your point is, really

BlewisJS 11y ago

The article states that 6 months earlier, the board turned down a potential sale valued at double the eventual sale price.

tvladeck 11y ago
This would be relevant only if the better opportunity was contemporaneous with the one Good accepted. As you mentioned, that opportunity was six months' gone.

jameshart 11y ago

They're not separate. The valuation of a thing is dependent on how much money the owners of that thing are willing to accept for it. The common stock holders' interests were poorly represented in the price negotiation. The decision to structure stock ownership in that way is, again, entirely the company's, not the tax system's. Sure, employees share some responsibility for accepting compensation that includes stock which can be sold on your behalf without your having any say in the price you're willing to take... but companies choose to offer comp packages which include that kind of stock precisely because it's hard for employees to value, and it's easy for employees to overvalue.

tvladeck 11y ago
> The common stock holders' interests were poorly represented in the price negotiation. You're mistaken here. Your point rests on there being a possibility that Blackberry paid the same amount for the company (the valuation), but common stock holders got more (the waterfall). This was not possible.
- jameshart 11y ago
  But the people negotiating the deal with Blackberry knew how the waterfall would shake out. They elected to agree to a price where the share of the purchase price distributed across common stockholders left many employees in a bad place. That was a choice. As was structuring the ownership of the company, and the compensation offers to their employees, in that way in the first place.
  - tvladeck 11y ago
    Right, but we have to assume that Good could not have gotten a better price from Blackberry. The alternative was even worse from the common shareholders - a price of $0 for their shares. They also could not have changed the waterfall. So I'm not sure what your point is, really