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Ask HN: Ex-Founder. Should I take lowball buyout offer?

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Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#21

Post by vladimirralev »

throwaway21121 wrote: post #3
icedchai wrote: post #2

Ask for more.

CEO refuses. How do I apply leverage?

Ask him how he came up with that price, see if he is able to make sense of it mathematically somehow, intuition is often wrong on pricing. Explain that a company with less owners (and thus less conflict of interest) is more valuable and less risky. Also a peaceful board is more valuable than a board backstabbing each other. If the CEO doesn't value these things then I am sure other investors will value it. You should be clear that he is stealing your cut of the value from risk reduction. Also, think if the CEO somehow has more information than you do. If he has more information and is buying, you should consider keeping the stock until relevant valuation info is shared.

Of course this could be wrong too, depends on the non-money terms the other investor got.

Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#24

Post by nedwin »

penpapersw wrote: post #22

[EDIT] I suggest looking at your situation from this perspective: $100,000 is a lot of money and can last you and your family over a year in certain places.

If you're looking for someone to work through marketing ideas happy to help. Email in profile.

Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#25

Post by thruflo22 »

tommynicholas wrote: post #19
thruflo22 wrote: post #17

Earlier quoted context omitted.

You could say that if the CEO doesn't improve the offer, you're going to write directly to the board / new investors. I'm not saying you should do this. Nor am I suggesting it's a good tactic. But it may provide leverage if you need some.

No reason to do this - you have the shares and the CEO wants to buy you out. Remember - the CEO wants to buy you out for a reason, and I guarantee you the investors want you bought out. Don't underestimate how much leverage "them wanting you bought out" is. It may even be a stipulation of the funding round.

Do the investors even know about the conversation?

People paying good money for shares will jump at the chance to buy them cheaper.

A CEO closing an investment round may have very different incentives, like not frightening the horses.

[edit, clarity]

Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#27

Post by terravion »

throwaway21121 wrote: post #3
icedchai wrote: post #2

Ask for more.

CEO refuses. How do I apply leverage?

Get the last 409A valuation. That's the price the shares should trade at and in fact will create problems for the company if they do not.

If the CEO offered the last 409A valuation as a price, then there's little you can do if you're inclined to take an offer because the 409A is the "fair market value" of the common stock. Usually the 409A is a huge discount, like 60-80% less at the stage you've implied the company is at, under the preferred price.

Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#29

Post by johnchristopher »

hhbbjvvhhhhb wrote: post #28
penpapersw wrote: post #22

[EDIT] I suggest looking at your situation from this perspective: $100,000 is a lot of money and can last you and your family over a year in certain places.

1-800-273-8255

There are better ways to express and show your support for people in such situations.

Re: Ask HN: Ex-Founder. Should I take lowball buyout offer?

#30

Post by terravion »

terravion wrote: post #27
throwaway21121 wrote: post #3

Earlier quoted context omitted.

CEO refuses. How do I apply leverage?

Get the last 409A valuation. That's the price the shares should trade at and in fact will create problems for the company if they do not. If the CEO offered the last 409A valuation as a price, then there's little you can do if you're inclined to take an offer because the 409A is the "fair market value" of the common stock. Usually the 409A is a huge discount, like 60-80% less at the stage you've implied the company i…

Also, missing in this discussion is that the board likely has to ratify any change in ownership and the board (led by the CEO) has tremendous ability to just say no and/or dictate who and at what price can buy. All this discussion of the what the fair value of the shares might be to outside investors is somewhat irrelevant in that situation.
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