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stock options question

bigdoublezero

bigdoublezero

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So I'm leaving my company, privately held, and they have a token offer to all employees to purchase 5,000 shares at $0.0951 per share, for a total of $475.50. Apparently there are about 57 million shares outstanding, so we're talking a very small fraction of equity here. There's also a transfer restriction.

They do periodically offer small dividends -- $0.01 or $0.02 per share, although once it was $0.10 -- so I guess it's conceivable some of that investment might be recouped.

I don't know if the company has much of a future, although it is growing. Thoughts from the finance Deacs on whether it's worth it here?
 
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looks to me like it's a 10%-20% dividend (unless they're quarterly, in which case it's 40-80%) on a $500 investment... don't see much downside here, the worst that can happen is you're out $500
 
The dividend yield is nice, although that is discretionary based on performance I am sure. The downside is that you have no liquidity and are pretty much at the majority ownership's mercy re liquidity event.

It is only $500.

There are closed end funds paying similar dividend rates with much more liquidity. GOF for instance.
 
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The penny per share dividend is about 10% on your investment. 10 cents per share is less than you are being asked to invest. How often does the penny or two div occur?

How long is the restriction? When it's over, is there a market for the shares or are you pretty much stuck with them? What is the current ownership of the company? family held? in the hands of some investor(s)?

What is $500 in your financial picture? play money? Petty cash? Next month's rent and food?

What is your true belief in the future existence of the company?
 
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Do you spend $500 a year in lottery tickets? If yes, do this instead. If no, don't gift them $500 you'll likely never see again.
 
Deaconblue said:
The penny per share dividend is about 10% on your investment. 10 cents per share is less than you are being asked to invest. How often does the penny or two div occur?
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They've paid a dividend the past five years, but there is no guarantee.

Deaconblue said:
How long is the restriction? When it's over, is there a market for the shares or are you pretty much stuck with them? What is the current ownership of the company? family held? publicly traded somehow, even if only on penny sheets or OTC, or is it mostly in the hands of some investor(s)?
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Restriction lasts until the company is bought or goes public. Basically I pay them $500, and I get paid if the company makes something of itself. It's completely privately held, no public trading of any kind, mostly in the hands of investors and the founder.

Deaconblue said:
What is $500 in your financial picture? play money? Petty cash? Next month's rent and food?
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I mean, it's not going to break us, but I'm going back to school this month, so $500 is $500.

Deaconblue said:
What is your true belief in the future existence of the company?
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The company is growing but I don't see a gangbusters future for it.
 
Well, the investors will want to enact a liquidity event at some point, so that's good.
 
I'd imagine it's much more likely that the company will be purchased vs. going public. Even if it's bought for like, what, $25 million, that at least means I'd be due for a couple grand, right?
 
bigdoublezero said:
They've paid a dividend the past five years, but there is no guarantee.



Restriction lasts until the company is bought or goes public. Basically I pay them $500, and I get paid if the company makes something of itself. It's completely privately held, no public trading of any kind, mostly in the hands of investors and the founder.



I mean, it's not going to break us, but I'm going back to school this month, so $500 is $500.



The company is growing but I don't see a gangbusters future for it.
Click to expand...

So in your opinion, does "growing but not gangbusters" mean the ability of it continuing to send out a penny or two per share in the future is greater or lesser than what it has done in the last five years?

This is the real question you need to answer: Can you spare the $500 in hopes of possibly some significant return down the road, with (possibly) some small interim return, or is it money that you really need to spend elsewhere for your living and education expenses in the next few years?

It sounds like this "investment" is somewhere above lottery tickets and slot machines for certainty of return on investment, but far from Dow 30.
 
bigdoublezero said:
I'd imagine it's much more likely that the company will be purchased vs. going public. Even if it's bought for like, what, $25 million, that at least means I'd be due for a couple grand, right?
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That sounds about right. $28.5 million would be 50 cents per share.

What is the ownership split between founder and investors?

How much do the investors need to cash out to trigger the lifting of the restriction? I.e., if one of the investors sells his stake to another investor or back to the founder, is that enough to lift the restriction, or does it need to be a majority ownership transfer?
 
bigdoublezero said:
I'd imagine it's much more likely that the company will be purchased vs. going public. Even if it's bought for like, what, $25 million, that at least means I'd be due for a couple grand, right?
Click to expand...

Depends. Do you know if any/all of the investors have Preferred shares?
 
Deaconblue said:
That sounds about right. $28.5 million would be 50 cents per share.

What is the ownership split between founder and investors?

How much do the investors need to cash out to trigger the lifting of the restriction? I.e., if one of the investors sells his stake to another investor or back to the founder, is that enough to lift the restriction, or does it need to be a majority ownership transfer?
Click to expand...

Unsure, but I believe it's more likely a majority ownership transfer.
 
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