Share advice please.

mcscoty1973

Hello, I am looking for some advice.

When I joined the company I work for four years ago I was offered EIS shares that can be exercised when the company is sold. Now there is a possibility that the company will be sold on hence my question.

The deal that is being muted just now is pay a lump sum of 6.5m for the company then an earn out up to 1m on top of that may payed, providing the company meets certain milestones.

What I want to know is, if the company is sold, do the shares that I may get only get calculated on the initial lump sum for the company, or are they treated like any other initial investors shares and therefore I would be entitled to a share of the earn out if the conditions are met.

Next question is, once the company is sold, do I have to sell my shares to the new company, or can these just be converted to real shares and therefore will entitle me to a possible windfall if the earn out condition are met.

I hope I am making sense, as you can tell, I have never had shares before and I am completely unsure, just want to be prepared.

Dont know if it makes a difference but I live in Newcastle so english law should apply here.

mcscoty1973

is there no one with any information for me?

calypso_rhapsody

I don't think anyone can give you a definitive answer as it will almost certainly depend on the articles of assocation of the company and the terms of the deal with the purchaser. It is not uncommon for the 'earn-out' to be linked only to the key management/owners in such deals as the objective is to tie those key people in and offering the earn-out to all shareholders become unweildy.

You should get a full explanation of what is being offered when the deal is agreed - in all probability as it is an EIS company there will have to be a proper takeover offer document - unless ther are only a few shareholders?

If you want to know more before the deal is formally on the table you will have to ask management .... but chances are they will be coy until there is an agreed deal.

mcscoty1973

Thanks Calypso that is pretty much my understanding of the situation as well regarding the earn out and management.

Do you happen to know, do I have to sell these shaeres once they are exercised, or can I keep hold of them hoping their value will increase. Its a high risk for me, but one I might be better to consider if I/we are all being ripped off because of the earn out.

Cheers.

Linton

mcscoty1973 wrote: »

Thanks Calypso that is pretty much my understanding of the situation as well regarding the earn out and management.

Do you happen to know, do I have to sell these shaeres once they are exercised, or can I keep hold of them hoping their value will increase. Its a high risk for me, but one I might be better to consider if I/we are all being ripped off because of the earn out.

Cheers.

Depends on the terms of the deal. Your company may be bought for cash or for shares in the company taking over or some mixture of the two. Your company probably wont exist as a separate entity after the takeover and so its shares will have no value. You will probably have to wait for the formal documentation.