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Through my company's 401(k) plan, I was able to invest in the parent company's common stock. However, earlier this year after we were sold to another company, the common stock of the original company was closed to future investments via the 401(k) plan. Next year, that stock will no longer be an option in the 401(k) plan, and my stock will be liquidated and invested in another existing option.

If I wait until the deadline, will I risk the value of my company common stock liquidating at a lower value due to my fellow employees having to liquidate their shares then as well? Would it be wiser to liquidate a few days or weeks before the deadline?

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    Do they indicate whether the stock will be sold on the open market? Depending on how much stock is in the plan it could put some selling pressure on the stock, lowering the price. – D Stanley Jul 28 '17 at 22:40
  • @DStanley They do not say. To give some additional perspective, my company consists of about 10,000 people. The company with which the common stock is associated consists of about 100,000 people. The members of that company are not subject to this expiration. – BaronFiner Jul 28 '17 at 22:45
  • You said that your company is 10K people , and then say the company with which the company stock is associated with is 100K people? Is the stock you are talking about the stock for your company or are you talking about the ability to purchase individual stocks for any company via a broker with 401K funds? – mhoran_psprep Jul 29 '17 at 12:28
  • @mhoran_psprep My company was a wholly owned subsidiary of the company with the common stock, now it is a subsidiary of another company. – BaronFiner Jul 29 '17 at 14:40
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Is the parent company's common stock public? If not, then there will be absolutely no pressure from everyone liquidating at the same time.

If so, consider the average daily volume of transactions in the parent company's stock. Is it much greater than the volume your 10k co-workers will have to liquidate? If so, I wouldn't expect much of an impact from all liquidating at once.

Any other situation, you are probably right to be a bit worried about simultaneous liquidation. If this was my case, I'd probably submit a limit sell order so as to try and pick out a high for the timing of my liquidation, and lower my limit vs fair value as it got closer to the expiration of your ability to hold the parent company stock.

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I have had this happen a couple of times because of splits or sales of portions of the company.

The general timeline was to announce how the split was to be handled; then the split; then a freeze in purchasing stock in the other company; then a freeze in sales; followed by a short blackout period; then the final transfers to funds/options/cash based on a mapping announced at the start of the process.

You need to answer two questions:

  • Is the default final mapping of your investment what you want to do?
  • Do you want to wait until the deadline to either take the default option or make your own investment choice?

To determine if the final transactions will make the market move you have to understand how many shares are involved compared to the typical daily volume. There are two caveats: professional investors will be aware of the transaction date and can either ignore the employee transactions or try and take advantage of them; There may also be a mirroring set of transactions if the people left in the old company were awarded shares in your company as part of the sale.

If you are happy with the default mapping then you can do nothing, and let the transaction happen based on the announced timeline. It is easy, and you don't have to worry about deadlines.

If you don't like the default mapping then you need to know when the blackout period starts, so you don't end up not being able to perform the steps you want when you want.

Timing is up to you. If the market doesn't like the acquisition/split it make make sense to make the move now, or wait until the last possible day depending on which part they don't like. Only you can answer that question.

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It might go down a bit, or it might not. That is nearly impossible to predict, as the relative volumes are unknown, and the exact procedure is also unknown (they might do the selling over a longer period, or as a buy back, or immediately, or...)

However, why would you want to wait at all? It is generally not a great idea to put your savings into the company you work for ('all eggs in one basket' - when it goes down, you lose your job and your savings), so the best approach is to pick a good day in the next weeks and sell the stock and invest into something more neutral.

  • Not all of my eggs are in that basket. – BaronFiner Jul 29 '17 at 14:42

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