Shares in a Privately Held Company (How they Work, Ideas, Feedback, Etc...)
 

Hi guys,

I work for a mid to large size privately held firm who recently informed me they will be giving me shares in the company. (approximately 50,000 shares) This is the first time I've been given shares with any company and want to get some feedback on how they work. Pros and Cons etc.....

A little background.....I have been with the company for a drop over 5 years now and these stems from a recent acquisition. (My smaller to mid size firm was purchased about a year ago by this larger firm who is backed by an even larger private equity firm.) I understand this is more of an investment tool (in lieu of "right now money") which could compliment my 401K.

Thanks in advance !!!

I'm no expert here when it comes to the stock and shares game because I have none, but I've gathered some things over the years none the less and so I will say that as far as cons, you dont have any, its a win/win because you were given these, you did not have to purchase them like someone would on the outside investing in your company. Its a perk and incentive of being part of your company. Most large company's give stock options to their employees as an incentive to produce. You have nothing to lose, only gain. The stocks in your company will be worth what your company is worth now and in the future. So if your company does well, you will do well when you decide to cash out. If your company dissolves into a black hole, your out nothing.

Mostly accurate IMHO...

I'd guess these aren't options, but either restricted stock units or something else (as a private company?) I thought most companies went away from options because of the accounting issues with them.

But Junky is correct. There's almost no downside. I guess depending on what type of account these go into, you have to watch the tax implications if you sell, and if there's a vesting period.

Gotcha...thanks for the input guys. As soon as I have more details, I will post them up.

My gf is going through this right now at her job: she's being cut 3K shares. So, as far as I'm to understand, you treat them like stock, but it's not public stock. You can't buy/sell them in the traditional ways. HOWEVER, there is market for this stuff, but the rules are substantially different. In general though, you will hold onto these shares until: 1.) An IPO, where they then become publicly-traded shares, or 2.) someone who has passed the appropriate measures in the corporate rules buys them from you.

The thing you absolutely should do though is call a CPA. There may be (very serious) tax implications depending on how these shares work, and when you exercise them (or they are exercised for you).

Thanks for the input Unkie. Still waiting on details......