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> “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?
by 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]