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StabilityAI cofounder says CEO tricked him into selling stake for $100

forbes.com

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Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#11

Post by sidewndr46 »

khazhoux wrote: post #6

Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?

Yeah, I had a similar conversation with a founder a while back. Company he had founded was getting acquired. He was a minority stakeholder at this point. No ability to oppose the acquisition. Acquiring company wanted him to sign docs saying "I relinquish all my interest for no compensation". His answer was basically something like "I think you can spare $10000 if this is that important"

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#12

Post by [deleted] »

JohnFen wrote: post #8
cj wrote: post #7

I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, r…

They call it "swimming with the sharks" for a reason.

[deleted]

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#13

Post by kkielhofner »

One of the biggest warnings with "equity" in a startup:

Even if you know what you're doing and you watch it like a hawk it's pretty easy for other parties to pull any number of shady but technically legal moves to significantly devalue yours/others while protecting their own.

If this proves to have merit it's one of the more shocking (yet straightforward) instances of this kind of unfortunately routine behavior.

That said it's a little hard to believe anyone would take $100 instead of holding on to it to see what happens. Depending on personal circumstances I can see how $100k or more could be tempting but $100 is ridiculous.

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#14

Post by bartread »

khazhoux wrote: post #6

Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?

My immediate thought exactly. You'd have to be absolutely flat broke for this to make any sense whatsoever. Why sell it at all? And, if it's so worthless, wouldn't you be more than a bit suspicious if the CEO were so keen to buy it off you? Something here smells off to me.

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#17

Post by Michelangelo11 »

epolanski wrote: post #10

May I just say, that the most ridiculous thing in this news really is selling a 15% stake in a company for $100? I'm no way rich, but I would not even bother taking the time to go to a lawyer or whatever and do all this kind of paperwork for such a ridiculous amount of money, I'd just ride it however it goes and not care.

Right? Like ... what happened in that transaction?

My feeling is that the guy also got some favors or something under the table, and the $100 was purely nominal. If that's the case, it could be that whatever he was promised didn't actually pan out, and now he's suing in retaliation.

In any case, "$100 for a 15% stake" simply cannot be the whole story.

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#18

Post by lotsofpulp »

JohnFen wrote: post #8
cj wrote: post #7

I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, r…

They call it "swimming with the sharks" for a reason.

The above situation seems like swimming with goldfish. If you have less than 50% yourself, why would you bank on someone else not being able to get more than 50%?

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#19

Post by cabaalis »

khazhoux wrote: post #6

Odd story. The point at which you're selling your stake for $100, you've basically decided to give it away. Which raises the question: if he was just going to get $100 and nothing more, why not just hang on to it?

Hanging onto stock from a company I co-founded a few years ago has caused me tons of stress because that company constantly files for tax extensions forcing me to do so as well.

I have other financial processes which rely upon timely processing of my completed tax filing, and every year it causes me trouble. So if something is thought to be worthless and about to fold, "just hang onto it" could cause a non-zero amount of headaches.

Re: StabilityAI cofounder says CEO tricked him into selling stake for $100

#20

Post by [deleted] »

cj wrote: post #7

I was chatting with a company who sold a large minority stake in their company to a well known private equity group (think 49%) with the explicit purpose of retaining control. Soon after the transaction closed, the PE firm was able to covertly buy another 2% of voting shares from a pre-existing investor in the company, which resulted in the PE firm gaining full majority control over the company, kicked out the CEO, r…

[deleted]
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