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My grandfather passed years ago and left me with some shares of a California company. The company is not publicly traded and specializes in dividend income for its investors. I have decided it would be better to sell the stock and reinvest the capital in a way that better fits my investment goals.

How would I go about finding a buyer for these privately held shares? Is their valuation straightforward? What would the process be, from offer to acceptance to transaction? I am assuming the use of an escrow, but any insights would help.

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    Have you tried contacting the company - they might have a share-buy-back process.
    – Victor
    Nov 10, 2014 at 22:24
  • We are in the process of talking to them about a buy back, but they are hesitant. The issue is that they would have to sell stock to cover the buyback and we would be forced to eat the taxes on that sale, as well as our own capital gains. When all is said and done we could lose 50% of the shares' FMV.
    – fbrereto
    Nov 10, 2014 at 23:25
  • To add: their hesitation is due to the fact that we are such a minority stakeholder they consider this request little more than a nuisance, and are dragging their feet with a buy-back. We are looking to liquidate faster than they are looking to assist, and combined with the losses in FMV we are considering a sale to a third party.
    – fbrereto
    Nov 10, 2014 at 23:39

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The easiest way to find a buyer should be to ask the company to connect you to some of their other shareholders. I imagine they are much more likely to take those shares off you than a random investor on the street.

Otherwise, well, talk to people. At a golf club, maybe? :)

Valuation is not going to be very straightforward. Basically you'll get whatever someone is willing to pay. That's what FMV means when there's no real "market". Realistically, the price is mainly going to be based on divididend history and the company's assets, discounted for risk and liquidity (you're currently feeling the reason for the latter discount).

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    I believe the best potential buyer is people related to the company. The current shareholders would be the most possible ones.
    – AGamePlayer
    Nov 11, 2014 at 11:30
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SecondMarket attempts to add liquidity to privately held companies.

You may be able to find a buyer there, but this is still incredibly illiquid due to accredited investor regulations constricting businesses from catering to the 99%. As around 1% of the United States population qualifies as an accredited investor.

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  • Thanks for the suggestion; I reached out to them and got the impression they were not interested in dealing with the individual investor unless it was by means of the private company itself.
    – fbrereto
    Nov 10, 2014 at 23:36

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