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Philz Coffee close to closing deal to sell to private equity firm for $145M
- deepsun 1y ago> “All Common Stock will be canceled for no consideration and all Options will be canceled and extinguished for no consideration” How is this even legal?
- lawlessone 1y ago[flagged]
- renewiltord 1y ago[flagged]
- iwontberude 1y agoNice try at being a chud, you succeeded.
- stagger87 1y ago"In a liquidation, common stockholders receive whatever assets remain after creditors, bondholders, and preferred stockholders are paid." Coupled with what sounds like an already bad financial state of the company... I'm not claiming no foul play, but it looks like there is a reasonable avenue for what is happening.
- ryandrake 1y agoYet the board and CEO will get paid... So they're not that out of money. Just out of money enough to screw everybody but themselves. > Philz board members, which include former CEO Phil Jaber and his son, Jacob Jaber; representatives from investment firms Summit Partners and TPG Growth; and CEO Mahesh Sadarangani will receive payouts or bonuses from the deal.
- lazide 1y agoSalary takes preference over equity and debt in all liquidations.
- bruce511 1y agoInvesting in shares is, like most things in life, a task that requires some skill and understanding. Hence the concept of accredited investors. When you're swimming with the big boys, it pays to know the rules of the game. Unfortunately employees getting or buying shares from their employer have little to no investment skills. Yes, it's possible for these shares to be worth something, but if the company fails, they're last in line. It behooves tech staff, who think the road to glory is paved in stock options to get professional financial and legal (not to mention tax) advice. Or just consider all stock offerings to be worthless. The times it isn't are a rounding error.
- terminalshort 1y agoThe concept of accredited investors is nothing of the sort. It's an arbitrary income / net worth threshold.
- quickthrowman 1y agoIt’s a check for ‘can this person handle losing a large chunk of money when they get swindled by management after investing in a private company’, which will almost certainly be the case if you don’t have more money to kick in every round (dilution) or don’t own preferred shares, or any number of other tricks. Google or Meta recently ‘acquired’ a company by offering them salary packages that matched the equity they had in their company and then skipped buying the company so anyone with shares left got screwed over when the husk was sold for 1% of its prior value, since it was almost worthless once all the talent was acquihired.
- CommieBobDole 1y agoThe article implies that it's not a liquidation or bankruptcy, though, just a sale. I don't know how you can buy a company without buying its stock from the shareholders, given that they are the owners of the company, but there must be some special circumstance that's not mentioned in the article.
- leeter 1y agoThere are tricks. I've been through such an acquisition. The purchaser sets up a new "Philz Coffee Co LLC" then purchases assets and operations for the exact amount the preferred stock holders want. They then liquidate the old company. Because the old company was never legally "bought" the common stock holders are SOL because they now own stock in a fictional company. That's not to say they don't have options... but I am not a lawyer and that definitely involves lawyers.
- stagger87 1y agoI agree with you and don't know enough to speak authoritatively. That being said, I did find this definition of liquidation (below). The article hints the business was in trouble, the way I'm reading it, if the sale doesn't cover all obligations, its would be a liquidation. "Business liquidation involves selling off a company’s assets, such as equipment, inventory, and real estate, and using the proceeds to pay off debts and obligations. This process usually occurs when a business is no longer profitable, facing insurmountable financial challenges, or the owner decides to retire or pursue other opportunities."
- kasey_junk 1y agoIf the purchase amount is less than the liquidation preference amount of preferred shares then there is nothing to pay common shareholders.
- m4tthumphrey 1y agoRight? Can anyone answer this? The article doesn’t go into it.
- morcus 1y agoA follow up question: how can I check that my own stock is not subject to the same terms? Can publicly traded companies do the same?
- jeffbee 1y agoOf course. Common stock can always get wiped out by superior classes.
- adastra22 1y agoNo, not always. Only under specific circumstances like preferences. There are pro rata terms and minority shareholder rights. Something smells fishy about the article, but I suspect it is the journalist’s ignorance.
- idontwantthis 1y agoI think if it’s publicly traded and they aren’t comitting fraud then this situation couldn’t happen. If the company is drowning in debt and unprofitable you would have already lost your money because the stock would have lost value.
- bix6 1y agoCommon stock holders are last in line. Only if things go well do common stock holders have a chance. And even then they might still get worked.
- CGMthrowaway 1y agoThe common stockholders have voting rights...
- JonChesterfield 1y agoProbably also drag along terms which render said rights broadly ineffective
- deleted 1y ago[deleted]
- BUFU 1y ago[flagged]
- bix6 1y agoAdios to your favorite brand amigo
- jon-wood 1y agoDid you seriously need an LLM to tell you PE buyouts never go well for the acquired company?
- wand3r 1y agoCrazy. IDK, do you think the company taken over by a strictly for profit entity that just completely wiped out the value of all common shares and employee held stock and options will lead to me getting a better cup of coffee? ...
- 0xbadcafebee 1y agoPrivate Equity is basically buying a rusted-out car for $500, painting over the rust, using it for rideshares until the wheels fall off, then pushing it into the ocean. Then you use your profits to buy another rusted car. Except the car is a local coffee chain.
- givemeethekeys 1y agoWe have many more good locally owned coffee shops today.
- jerlam 1y agoIt's only a matter of time until those locally owned coffee shops become popular, expand, over-expand, then get acquired.
- morkalork 1y agoFollowed by regression towards the mean in quality, leading to under performance and giving way to a new crop of locally owned competition.
- terminalshort 1y agoSouthpark had a great episode on this where they burn down the Walmart and then this happens https://www.youtube.com/watch?v=scTjHvot3Uo https://www.youtube.com/watch?v=scTjHvot3Uo
- School-Cotton 1y agoThat is overly pessimistic. Plenty of businesses don't ever do what you suggest.
- smcin 1y agoCan any of you name some, in the southbay and peninsula?
- baristaGeek 1y agoPhilz Coffee reportedly nearing a $145M PE acquisition. Just another "only in SF" story. Where your barista’s startup dream comes true, and the morning pour exits before your Series B.
- rconti 1y agoPretty sure the barista's startup dream wasn't to have the stock they own to be cancelled.
- turnsout 1y agoBut what's more quintessentially SF than realizing your options are worthless?
- baristaGeek 1y agoExactly! Man… some people don’t get sarcasm
- koolba 1y ago> Dalla worked at Philz for nine years until last year, when he was laid off. He said that many longtime employees left around the same time as the company’s culture shifted to a more profit-driven, corporate culture. > On his way out, he said that CEO Sadarangani urged him against exercising his stock options — options that will now, barring changes to the current deal, be worth nothing. “I always assumed they would do the right thing,” Dalla said. Wouldn't the options also be worth nothing now? So by not exercising them at least the exercise money was spared?
- rconti 1y agocorrect, not exercising them would have been better.
- williamscales 1y agoThe tax hit, too, depending on the type and amount of options
- Analemma_ 1y agoThere is a bunch of shady and unfair behavior by the acquirers here, but yeah, that line doesn’t make sense. If the options are worthless, then exercising them would have been a waste of money - the CEO was helping this person out! I think this article was written by someone with lots of outrage and little actual understanding.
- deleted 1y ago[deleted]
- asadm 1y agoWasn't Philz the only Pro-Palestine coffee chain. That's too bad.
- adastra22 1y agoI fail to understand why a coffee shop should be taking sides on geopolitical conflicts.
- asadm 1y agoI agree. No idea why Starbucks, McDonalds, Zara etc. came out shouting support for Israel out of nowhere. Requiring a boycott from sane people.
- idontwantthis 1y agoIs that a thing that happened?
- asadm 1y agoyes. prompting listings/apps for finding brands to boycott, one which i use very much: https://www.boycat.io/ https://www.boycat.io/
- onetimeusename 1y agoMcDonalds did not officially endorse Israel. The franchise owner of all the McDonalds restaurants in Israel did. McDonalds corporate did not approve the message although it seems like it did not really matter what the facts were. (https://www.theguardian.com/business/2024/apr/05/mcdonalds-israel-franchise-boycott https://www.theguardian.com/business/2024/apr/05/mcdonalds-i...)
- adastra22 1y ago> Requiring a boycott from sane people. It sounds like you don't agree.
- mc32 1y agoThat sucks. It sucks that employees’s common stock will be cancelled. It also sucks that the vitality of the company will be drained. Maybe this was its destiny. With investments they were able to furnish nice locations pretty well. Better than many normal franchises. But perhaps that was overshooting and they will be brought back to financial reality by the PE firm —they’ll try to make it turn a profit at the expense of employees and customers but then again maybe it was existing on borrowed time (money). At least, so far, it’s a slightly better story than the ice cream shop that grew too fast and then had a complete meltdown from the financial burden.
- branperr 1y agoIs there any good reason why preferred stock exists? It just seems like another tool to screw people over in favor of investors.
- czhu12 1y agoTo entice investors? Im not a lawyer, but I assume you're perfectly free to try to raise money by selling common stock to investors?
- mlinhares 1y agoThe reason is to protect investors.
- ubermonkey 1y agoThe big answer is "no." I mean, look at Meta. The stock you can actually buy through your broker is not actually a stock that can control the company, so in a very real sense it's not a "share" in Meta. Zuck controls nearly all the "preferred" shares that have supervoting privileges, so he can operate it as though it's essentially a private firm. The board, which in a conventional public company could exercise control over the CEO, has no ability to remove him.
- jwatte 1y agoVoting rights in founder-led public companies, and liquidation preference rights in private investments, are very different things.
- deleted 1y ago[deleted]
- contingencies 1y agoIf you raise money, sometimes you just want the money. Other times, you are happy to cede some ownership and/or control. If things go pear shaped, investors want some protection. If things go really well, sometimes they band together and kick you out of your own company. At some point rules have to be codified: the systems for doing this are share classes, voting rights, information rights, articles of association, board resolutions, etc. While you can start a totally new system and run your company using a magical talking stick and rubber duckies on the blockchain, the reality is that just makes it unfamiliar and hard for conventional institutional capital to invest in, it also makes it hard for slow-moving conventional institutions such as banks and lenders to grok your operational process and internal structure, which in both cases generally limits your upside.
- yapyap 1y agothey can just cancel stock?
- boothby 1y ago> On his way out, he said that CEO Sadarangani urged him against exercising his stock options I'm curious about this, as it sets off a little alarm in my head. Is this a legal thing for the CEO to do?
- xvector 1y agoIt's not. CEO needs to be put in prison.
- gsibble 1y agoSounds like Windsurf.
- k310 1y agoSpeaking as a coffee drinker, I saw Philz distribute through retail stores far away from SF, and expect enshittification (figuratively) in the future. For other Tesora addicts, the house brand Italian roast at Safeway/Von's is very similar and a lot cheaper. I can't imagine what changes are coming. Probably Son of Philz AItalian Roast. It was fun and flavorful.