Share Options and an IPO

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ROSSinHD

Original Poster:

821 posts

150 months

Wednesday 25th April 2018
quotequote all
Hi all

I have an oppurtunity to purchase a number of shares in my employer at a fixed price. The company is currently listed on a local, non liquid exhange and the share price is currently 12p more than my options.

I envisage a listing on a major exhange in 3 years and I believe the target listing price to be over double maybe treble of my options and if looking at similar companies not in the same shape as us they listed at 6 X my option price.

If I excercise my options which I can do up until end of April 2019 I have certain conditions such as can only sell after certain periods. The first oppurtunity to sell would, in my belief, well after the IPO which I would not be in favour of.

What actually happens to shares in a company at an IPO. Do all shares take part, would I be blocked out of it due to my sale restrictions etc. I will be asking the right person in the company but would like to get my head around what happens to all shares when there is an IPO.

fat80b

2,242 posts

220 months

Thursday 26th April 2018
quotequote all
ROSSinHD said:
Hi all

I have an oppurtunity to purchase a number of shares in my employer at a fixed price. The company is currently listed on a local, non liquid exhange and the share price is currently 12p more than my options.

I envisage a listing on a major exhange in 3 years and I believe the target listing price to be over double maybe treble of my options and if looking at similar companies not in the same shape as us they listed at 6 X my option price.

If I excercise my options which I can do up until end of April 2019 I have certain conditions such as can only sell after certain periods. The first oppurtunity to sell would, in my belief, well after the IPO which I would not be in favour of.

What actually happens to shares in a company at an IPO. Do all shares take part, would I be blocked out of it due to my sale restrictions etc. I will be asking the right person in the company but would like to get my head around what happens to all shares when there is an IPO.
I would advise being careful - amongst my time with shares and companies I have worked for, I have seen numerous people make irrational decisions based on the fact that they work for the company and therefore believe it is a safer investment than something else. Many people have done many silly things (remortgaging houses etc to buy shares that can only go up..... right....wrong).

You already have a lot invested with them - your job / salary etc, are you sure you want to go "all in" on the same bet - betting on your own employer is the polar opposite of diversification....

That said, taking free money when it comes along is always good so definitely maximise any schemes that you can pay into. but if you have spare cash lying around, it might make more sense to consider diversification.

ROSSinHD

Original Poster:

821 posts

150 months

Thursday 3rd May 2018
quotequote all
Thanks, I do not plan on going "all in". It doesn't fit my portfolio as such or my attitude to risk as this is risky especially as it is a company I rely on to fund my living as well so if it goes tits up I have lost salary and investment money.

I have been told that I could in effect get shares for free by selling options at current market to then buy back at my option price but obviously am not permitted to sell all to buy a greater number back at the cheaper price i.e in terms of these option shares I cannot go above 56,250 shares in the total transaction relating to these options.

Would my math be correct and I sure it is not but I ask the trust to sell 54,044 of my options generating £83,227.76 at current market price of £1.52 per share. This then gives the trust a profit of £3,352.76 which I can then use to buy shares at my option price ensuring that I do not go over a total transaction of 56,250.

So I have worked out I could then ask the trust to buy 2,206 at £1.42 for a total of £3,152.52 bringing the total I have transacted to 56,250, and the trust has cash of £80,095.24 so has more money that the £79,875 I would have given it if I had bought all my options.

I really need to ping a mail to the CEO who is dealing with the options.

Whoozit

3,583 posts

268 months

Wednesday 23rd May 2018
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ROSSinHD said:
What actually happens to shares in a company at an IPO. Do all shares take part, would I be blocked out of it due to my sale restrictions etc. I will be asking the right person in the company but would like to get my head around what happens to all shares when there is an IPO.
I can take this one.

- IPOs typically sell 25-40% of the shares in the IPO, including any new money raised.

- There may be an option for you to sell shares in the IPO, however depending on which banks are running the process they may be very un-keen for you, a small retail account, to be a direct client even for the IPO. The larger the bank, the more un-keen. It's a different story if the shares are kept, for instance, in an employee trust which is selling on your behalf.

- Senior managers are contractually locked up for usually 12 months following the IPO (sometimes 6 months although that's rare).

- After that 12/6 months, and at any time irrespective of whether you are senior management, your company will have a dealing code post IPO which restricts when you can buy and sell shares. After a results announcement will usually be deemed safe, unless you have material non public information as a result of your role.

- Take a tip from an ex banker, and treat the options as salary. They are after all part of your compensation. Convert them into cash as soon as possible, don't take the equity risk.




Edited by Whoozit on Wednesday 23 May 13:26

anonymous-user

53 months

Saturday 26th May 2018
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You also need to consider the type of share the option is on, if the company needs to obtain external funding this usually results in dilution of the shares i.e. loss of value.

Also worth considering how much the company needs to be sold for before there is any money to pay out on your shares as higher preference shares are paid out first. Employees are usually at the bottom of the list.

ROSSinHD

Original Poster:

821 posts

150 months

Sunday 27th May 2018
quotequote all
Thanks for the food for thought. Only one type of share so the filing ladies buying through the buy as you earn scheme and the CEO with his millions of shares all holds the same share with same rights to vote and divi.

I can now sell the options before buying them and then use than profit to buy my options so I will pick up about £4K worth for free at present, but I am not doing that until April as the projection is the share price should be +50p by then and if it is I will end up with more shares for free. This suits me and added to the shares I own already and my monthly purchase from the buy as you earn I am happy I have a hand in the pot should we list and will collect a repectable Divi once or twice a year.