The small company I work for is looking to sell to a large public company. I have shares in our company.

  1. What will happen to my shares if the company sells?

  2. How would they change in price?

  3. When should I cash them out?

  4. If I'm not allowed to stay on as an employee, what are my options?

    I'm not familiar with investing. I'm in the US. Thanks for your help.

  • 2
    It depends on the nature of the transaction. – quid Aug 16 '16 at 18:53

Multiple results are possible depending on the details of the sale AND the details of your shares.

If you own shares (as opposed to options), you will either receive cash OR shares in the other company OR shares in your own company may be preserved (if your company continues to exist as a corporation just owned by a holding company). Which depends on the agreement with the larger company.

As to when you should cash them out - you may want to talk to a financial advisor. It's not a straightforward choice; your shares or options may rise in value or drop in value with the sale, depending on how it's sold. If this is a 'good' company looking to sell just because it's the right time to do so, they may rise in value. If your CEO is looking to get out of the business, then they may just take whatever they can get and your shares could lose value. And of course some of this depends on how you could cash out your shares - assuming your company is not public, this may be complicated, and if your CEO is selling they may disincentivize cashing out (or may incentivize it).

I don't think the 4th question really falls into personal finance; ultimately your options are, again, determined by the sale, and you might be given a buyout or might just be terminated, but either way it sounds like having a good solid backup plan is a great idea right now.

  • Thank you. The company is in good standing and we are selling because it's the best time to sell. We are a startup, not a public company. I have shares, not options. I think the shares will rise. My question is by how much? We have 7 companies that are bidding for a purchase, and their stock prices range from $11 to $130. I'm told ours are worth about $3 as is. Will it jump to match the stock price of the buyer, or only increase slightly? Also, I think I will remain an employee, but if not, I'm trying to guesstimate what kind of funds I will have in case. – baonaj33 Aug 17 '16 at 21:26
  • It will be worth whatever the buyer decides it's worth. There is not a relationship to the value of the buying company; they will give you either cash, or some proportion of a share (or shares) of their company for each of your shares. Say they value you at $10/share, and they are $40/share, they will give you 0.25 shares of their company for each of yours. Or $10. Or $5 and 0.125 shares. There's no way to determine what it's worth though without being in the negotiating room, or asking a professional to evaluate the company's books/etc. – Joe Aug 17 '16 at 21:28

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