Don't treat this as asking for financial advise, but I'm just curious to hear what others would do if put in this position.


Hypothetically, say you were given a 1% stake in a company you had been/are working for, a company which is being bought out by a multi-billion dollar international. The buyout value of the company would be in the mid 8 figures - which (obviously) would give a 1% owner a healthy six figures worth of shares of the new parent company.

My question is this:
If placed in this situation yourself, what would you do? Retain your shares in the billion dollar company and continue getting the annual payouts? Or sell off the shares for their cash value?

Opinions?

Sell and invest in something safer.

You don't wanna stumble across six figures and then lose it. Ask Enron employees.

Sell and diversify or maybe buy a house.

reminds me of old mate at work here getting given 1000 shares in AMP a few years back when they were worth 20 bux a share

i told him to cash them in, but he didnt

im not sure what AMP is worth now, but its closer to 5 dollars than 20

thanks for sharing

but




obviously without more info it is pretty pointless, dare I say stupid asking for our opinions.

Hypothetically, say you were given a 1% stake in a company you had been/are working for, a company which is being bought out by a multi-billion dollar international. The buyout value of the company would be in the mid 8 figures - which (obviously) would give a 1% owner a healthy six figures worth of shares of the new parent company.

Sell it and invest your money in something a bit more stable (real estate, blue chips, etc). Company values go up and down quicker than a Vietnamese man-boy.

r_mazing and TicMan are right
buy house
or diversify.

Sell and put the money back in to Eastvale Logging Co or maybe that new Fargo Deep mine.

It all depends on whether the strategy of the company matches your risk profile.

Tell us your risk profile and the industry in which the company is and then we can talk more.

I just bought $30k of RPS, a speculative mining company. High risk but looking to make about 40% on it.

But it's the new google maenz!!!

Depends ...

Sell means capital gains tax, and if its a bleu chip why sell ?

Hermi, if it were google, the choice would be bleedingly obvious: Sell. At USD500 a share, they're so easily at risk of a crash, and it's not like their share price is going to double any time soon.

Never! Google will soon become the Fourth Reich!

Don't get sucked into the actual price of a share. It all relates back to its Price/Earning ratio. For instance currently, RIO is cheap at $78 but BHP is dear $28.

You need to find out how much money the stock is actually making.

Tell us more about the P/E ratio. Why is RIO cheap and BHP expensive? I don't understand.

isnt it to do with original share price?

ie company A is worth 100 mil, so it sells 50 percent of its stock worth 50 mill, but in a million shares so it works out at 50 bucks a share

but company B is worth 1 mill, sells 50 percent at 500 thousand, splits it into 50,000 shares and is worth 10 dollars a share, but both experiencing the same percentage growth gives the same value to someone thats bought a dollar value of that share

someone correct my noob understanding

transfer stocks into a managed fund.

sell some of them (as much as you need) and reinvest, only though the managed fund (can be self managed ofcourse, requires a GOOD accountant to help setup and assist with). This will avoid hefty tax fines afaik.

2 questions

1. how good is your company and was it a smart purchase that reflects well on the purchasing company, will their purchasers share price be helped or hurt by this move

2. how good is the company that's bought you guys out. Is it growing to gobble up its competitors or is it growing to offer a better array of services that will reflect well on its ability to compete. Is the company itself sick and dying (Like AOL/Timewarner)

You're probably better off waiting a few months and getting a better impression of the company you're going to be working for. After that time you'll be in a better position to make a good decision, being a shareholding employee puts you in a unique position in terms of your ability to trade companies shares, that's why insider trading laws are so strict.

If it's a true blue-chip then holding off shouldn't hurt you at all.

The worst thing you can do IMHO is sell them all and suddenly have all this money which changes your financial position so rapidly. Unless you're very disciplined you're going to waste a fair portion of it.

transfer stocks into a managed fund.

sell some of them (as much as you need) and reinvest, only though the managed fund (can be self managed ofcourse, requires a GOOD accountant to help setup and assist with). This will avoid hefty tax fines afaik.

Transfer is a capital gains tax event and he will have to pay the deemed capital gain on the shares.

edit: Honestly though if you're talking about the amounts you claim to be then you'd be stupid to not seek professional advice. Yes they will charge you a lot but they could also save you a lot more.

last edited by Denny at 17:00:59 07/Dec/06

Tell us more about the P/E ratio. Why is RIO cheap and BHP expensive? I don't understand.

I have only gotten into this technique over the last 2 years, since I started trading 1mil + deals but it goes a little like this.

It's all about dividing how much profit a company makes per share into its current share price. e.g. if BHP makes $2.80/share and the industry average P/E is 10 then the typical price for this share would be $28. However if BHP has production hold ups or capex overrun then their P/E will be marked down because their future earnings will be down. If they make a new discovery or a project starts on time, then P/E will go up because future earngins will go up; Share price is not about what the company has earnt but what the market thinks the company will in the future.

So when I say BHP is dear and RIO is cheap is because RIO has more projects coming online in th enext 12 months so will have stronger upward earnings capacity than BHP whose major projects will be at least 2 years away. The makret hasn't fully priced in RIO's upward earnings thus it is cheap.

Back on topic if you got the 1% share holding for none/limited outlay you should hold it for a significant period.

1. It owes you nothing and could be worth substantial amounts if the business is developed properly.
2. Hold it for at least 12 months to benefit from the 50% discount on CGT for individual investors.
3. Financial advice will not help you here. Read the audited accounts of the business, read their business strategy, if you like what you read stay with it, if you don't dump it.
4. Don't invest in anything illegal or unethical because the ATO will come for you next.

Good luck.

obviously without more info it is pretty pointless, dare I say stupid asking for our opinions.

You've got plenty of info. I'd move the value of the shares to some other investiment as i would feel the risk is too high of having all that money and my employment in the same business/industry. When things turn bad you don't want to lose that investment as well as your job.

Hm. So for example, take one which is $26.86 per share, $0.79 per share earnings. (17,500 shares). That's US dollars too. Not too shabby at all. When I saw $0.79/share I thought "that's s***"... but then I realised that's well over $20k/year just in share value, not exactly chump change. That kind of figure you'd think you'd just stick with them.

more to the point the scenario you refer to places the stock at a P/E of 34 which is extremely expensive, considering most blue chip stocks are priced in the 10-20 range.

Easy, sell the f***ers and invest the money in something you actually have some say in. The company could go broke over night, buy property NOW!

Property is highly illiquid (hard to sell) and the cash returns are hopeless. Property is fine if you can afford to be negatively geared (i.e. be paying more on keeping the property than the rent it generates) but if you are looking for a little extra income don't look to property.

you havent checked the stats on the Brisbaen rental market and whats happening over the next few years. Property is where its at.

For instance currently, RIO is cheap at $78 but BHP is dear $28.

Whilst P/E is a very good reference point for share trading, I can't understand how you think BHP is expensive at $28.

BHP shares to me value in at around the $50 mark, if I had more cash I would buy a truckload of them. Similar to MRM who are riding the WA resource boom which won't die in the next quarter century! BHP hold about 75% of Uranium mines in Australia, but don't actually mine them. When that govt plan kicks in for 75% nuclear energy, watch the BHP shares fly as they suddenly start mining all those "useless" uranium mines!

last edited by spidz at 23:00:12 07/Dec/06

don't get me wrong, i love BHP too - i have 650k worth of them but that is a longer term 2-3month hold. I bought 750k worth of RIO last week though knowing they were undervalued at $75 and sold them 2 days ago for $78 making $30k.

It is a point in time assessment for identifying chronically undervalued stock is all I am saying.

As for property, you will not make the short term gains I am referring to here from it. Property is a 2+ year investment.

I see your point, I guess I wasnt looking at the short term cash up side.

Sell and put the money back in to Eastvale Logging Co or maybe that new Fargo Deep mine.

rofl.

Sell and put the money back in to Eastvale Logging Co or maybe that new Fargo Deep mine.

I giggled.

My knowledge is limited to the teachings of my dad, high school economics and some reading. I'd say diversification is the key, over specialisation is a weakness, don't put all your eggs in one basket.

Making 30k, less brokerage and capital gains tax, still it was a tidy 2-3% return in 2 days. Power to ya.

Blue chips are all about the long term investment in real shares, buy and forget come back in 20 or 30 years. You have a heap of money and you did nothing!

Day trading is an advanced form of gambling. Specially since most of them are playing with "warrants" or "Futures" not real shares, and in a lot of cases people don't actually have the real capital to purchase said shares, and what capital they do have is an "investment loan". It has happened tho where people have been caught by that after a particular share stopped trading for a week or 2. And like any form of gambling you can make big gains, or you can lose it all. "Obes you f***ing don't know nothing I made a gazillion last year my throwing darts at a piece of paper" ...

http://www.lowrisk.com/image/dow29monthly.gif

Learn from history.
After the 1929 crash the DOW didn't return to its pre crash levels until the mid-50s.

Day trading is an advanced form of gambling.

Quoted for the truth!

I used to work for a financial management place - specialising in the managed funds side of things. Sure it was great when he was making 3% a month and made about 80k on a 500k account in about 6-8 months. But then there was the time he lost about 600k in a night on the accounts (~30%).

Sure shares can make you a s***load of money but from what i've seen most ppl always end up giving it back to the "house".

it's not gambling if you know what they are worth. remember these companies are churning out billions of dollars in profit per year, with market caps in the 100s of billions.

they are not Tech startups or penny dreadfuls.

the price of any asset can go up and down, houses, wheat crops, pokemon cards. when the herd gets nervous you can get burnt that is sure.

man i need more money to play with... lol

infi can i give you 10k can u make that rise!!

as the brokers say, past performance should not be used as an indicator of future performance.

don't get me wrong, i love BHP too - i have 650k worth of them but that is a longer term 2-3month hold. I bought 750k worth of RIO last week though knowing they were undervalued at $75 and sold them 2 days ago for $78 making $30k.

then i take a break and spam n00bs on qgl. OH A DAY IN THE LIFE

sell it and invest in emu farms and pine plantations. they are sure fire win stocks

Google staff where issued share prior to float @ < $80 those shares are now worth $500... there is aflip side to every story.

Why not hedge your bets and do a 50/50 split, and talk to financial advisor to help minimalise your tax burden.

Pine Plantation, you say Crusher.
Interesting you mention that. In the late 30's, my Great Grandfather bought shares in a Pine Plantation company. Long story short, the trees burned down, shares were worthless, so never bothered selling.

Acquired in his will in the late 70's, these shares were worth about a grand or two. The Pine Plantation company had turned itself into a share trading/investing company apparently.

Through a series of several 1980's crazy economy spikes, and share offers at the right times, the shares have turned into enough to buy a small new BMW/Benz.

Just goes to show, if the company don't go bust, and you're willing to wait FRIGGIN AGES, you can make a killing.