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So lets say that bob thinks that the proposal is over valued and sells his shares to Alice. Now Alice wants out, but is 50k poorer, and owns the entire company
by mkoryak 5y ago
So lets say that bob thinks that the proposal is over valued and sells his shares to Alice.
Now Alice wants out, but is 50k poorer, and owns the entire company. How does it help the company to now be run by someone who no longer wants to work there, but has to because of debt?
- etchalon 5y agoThat situation would imply Alice over-valued the company, and Bob was 100% right to sell his portion and walk away.
- mkoryak 5y agoI get that Bob is happy with this outcome, but what about the company?
- horsawlarway 5y agoAt the end of the day - most of what makes a company valuable (or even functional) is the people who are working there. Sometimes novel IP has value, and sometimes the company has assets that are worth something, but this is relatively rare for software companies. If you are relatively popular with your current users, your brand may also have some worth, and quite a few companies are happy to scoop up a brand, hollow it out, and retire it a few years later once it's no longer associated with anything worth while. Otherwise... The company dies, because it was not profitable enough, and this is both normal and expected.
- sergiosgc 5y agoThe company avoided a shareholder fight for shares. This is actually a defense mechanism for the company, not the founders.
- sergiosgc 5y agoIt solves the basic problem of stabilizing the shareholder group. No more infighting. Important to your point, this method makes it difficult to stray from the real valuation. If Alice really wants out, she does not value the shares as much as Bob. Her just valuation will be viewed as a good deal by Bob. The scenario you define probably will not happen. If it does happen, then by definition Alice actually valued staying with company.