Hang On Another Six Months

Mark got involved in an internet start-up and kept his 4% share. He's been approached about selling his shares. The company has a lot of potential. Which way should he go?

QUESTION: Mark in Switzerland got involved in an internet start-up a couple of years ago but is no longer involved. He kept his 4% share. He’s been approached about selling his shares for $18,000. Mark isn’t sure he wants to sell because the company has a lot of potential. Which way should he go?

ANSWER: So you have a $7,000 a month household income. You’re living in Geneva newly married, and you’ve got this guy over a barrel. Let me tell you what’s going to happen with your $2,000. You’re either going to get a huge pile of money for it or you’re going to get nothing. This company is not going to be anywhere in between. They’re either going to go to the moon or go to the ditch. Do you want to roll the dice on that?

I kind of feel like that if he’s offering you $18,000 that something is in the distance right there that he knows that you don’t know. I’m kind of thinking there’s a suitor out there that might be talking numbers that might be your share is worth $180,000. If you sold it for $18,000 and found out six months later he sold the company and your shares were worth $180,000, you’d have a whole new level of anger toward this guy.

Are you willing to get nothing? Are you willing to bet nothing against something? I am in this situation because you don’t need the $18,000. Two thousand dollars in the scope of your life is not risk anymore. For that matter, with the kind of money you two make and your abilities in the marketplace, $18,000 is not much risk in the scope of your life. Now if you had $18,000 cash in your hand, I wouldn’t tell you to go buy into this company.

Something about this conversation makes me smell a rat. I think we might just wait six months and see what happens. Just watch him squirm. I’ll bet he stutters in that conversation.

It’s not the end of the world. It’s all for fun at this stage. If you want to take the $18,000, take the $18,000 and walk away. Then try to avoid ever looking at this company again to see what they did. You never want to find that out. You’ve got to be willing to take nothing, take the $18,000, or watch the guy squirm. I just got a sense that it might be worth $200,000. You have no power as a minority shareholder. He could mess with you. There’s a lot of stuff he could do to you. He’s finding cash to clean up his mess right now for some reason or another, and I don’t know what that is. It sounds like he’s bringing the shares back together to do his deal. He may have an investor on his hip who wants him to clean up these little outstanding problems he created by not treating people well. That comes into the territory.

Have some fun with either way. Take the $18,000 and enjoy it. That’s good for me. Or, if you want to have some fun with it, I’m good with that, too. It’s not a bad answer because you’ve got yourself in a good situation to where you can deal from strength. I tend to feel something in the air here. I think if I were in your shoes, I’d wait six months. I don’t know that I would always do that, but in this case, I think I would.

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