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> the stock is worth something but in reality it’s worthless What? How is it worthless? When they distribute profits, you'll get your share of them, or you can

> the stock is worth something but in reality it’s worthless What? How is it worthless? When they distribute profits, you'll get your share of them, or you can sell the stock to someone else.

joshyeager 5y ago
In a privately-held company, you usually can't sell your stock without approval (from the board, a shareholder vote, or some other mechanism). That generally makes it quite difficult to sell. Dividends are the main source of value from stock in a company that doesn't plan to sell. But dividends are also determined by the board. In a closely-held company, the majority owners may also be the board, and they may prefer to leave the profits in the company or take them out a different way. "Worthless" is an extreme characterization, but the value you receive from owning a minority amount of private stock is much less predictable and controllable than publicly-traded stock.
- jrs235 5y ago
  You are correct. I was going to post a similar response. Regarding worthlessness: I suppose some might place some value on access to company financials.
- hellisothers 5y ago
  Exactly this, there is no liquidity available for this stock ie it has no monetary value because you’re not allowed to sell it and it will never be sold. I think at one point a tiny dividend was paid, once, but it became clear the profits are intended for the principal owners. Which really is conceptually fine as long as that is clear up front.
majani 5y ago
Stock and dividends are two separate agreements. One does not automatically guarantee the other
Voloskaya 5y ago
Most startups don't offer dividends, even when they do it doesn't amount to much, and if they indeed never sell/IPO/raise a new round, then you have basically no way to sell your stock, so it's indeed pretty much worthless. Only other way to sell would be with approval of the board, but even assuming you get it, who would buy that?
deleted 5y ago
[deleted]

> the stock is worth something but in reality it’s worthless What? How is it worthless? When they distribute profits, you'll get your share of them, or you can sell the stock to someone else.

joshyeager 5y ago

In a privately-held company, you usually can't sell your stock without approval (from the board, a shareholder vote, or some other mechanism). That generally makes it quite difficult to sell. Dividends are the main source of value from stock in a company that doesn't plan to sell. But dividends are also determined by the board. In a closely-held company, the majority owners may also be the board, and they may prefer to leave the profits in the company or take them out a different way. "Worthless" is an extreme characterization, but the value you receive from owning a minority amount of private stock is much less predictable and controllable than publicly-traded stock.

jrs235 5y ago
You are correct. I was going to post a similar response. Regarding worthlessness: I suppose some might place some value on access to company financials.
hellisothers 5y ago
Exactly this, there is no liquidity available for this stock ie it has no monetary value because you’re not allowed to sell it and it will never be sold. I think at one point a tiny dividend was paid, once, but it became clear the profits are intended for the principal owners. Which really is conceptually fine as long as that is clear up front.

majani 5y ago

Stock and dividends are two separate agreements. One does not automatically guarantee the other

Voloskaya 5y ago

Most startups don't offer dividends, even when they do it doesn't amount to much, and if they indeed never sell/IPO/raise a new round, then you have basically no way to sell your stock, so it's indeed pretty much worthless. Only other way to sell would be with approval of the board, but even assuming you get it, who would buy that?

deleted 5y ago

[deleted]