What happens to individual stocks if a company goes private?
 

Hi,

No names needed as there are threads already related to the actual company over in PARF. This is just me being curious as I have no individual stocks in my control from this company or any others, just mutual funds, so no dog in the race either, just an opportunity to become more knowledgeable.

My question is if a person had a couple stocks in a company that was being bought and they didn’t want to voluntarily sell, what happens?

Does the public company actually dissolve making those shares worthless, do you have no choice and money just shows up or something else?

Thanks guys

It can be done in a number of ways.
But in Twitter’s case, it appears to require Board approval (done), then I believe majority of shareholder approval, and regulator approval, then the shares are bought out at the $54.20.
Yes, at that point the shareholders have no choice, they get the money for the stock.
The company still exists, but it’s not regulated as a public company any longer because there’s no longer any publicly held stock.

Happened to me. I had a certain length of time to ask for a payout. If I didn't request a payout I'd have got nothing. You get letters in the mail, just not money unless you sign etc.

My guess is that almost all small Twitter shareholders hold their shares in brokerages like Charles Schwab etc. and once the deal is finalized and closed, they will just automatically see the shares gone and the money in their account one day.

My daughter is in upper management at Twitter. She like most of her coworkers are very nervous. She is going to have a huge tax burden when this is all settled.

The tax burden will be because she just made a ton of money from selling stock she likely got for almost nothing. My heart bleeds for her, receive a huge check and taxes are due. It is a really good issue to have. A total first world problem.

I will happily pay whatever taxes if someone give my a big check.

I hope she invest the money wisely.

Good answers guys, thanks.

Sign me up for a huge increase in stock price and I’ll pay the taxes due with a smile!

Seriously though, I hope the current staff keep their jobs, that would be my bigger worry.

Is there some kind of rule where if income is some amount over your advanced pay in that one gets stuck with filing estimated taxes from then on?

Plenty of them will leave on their own and plenty will be shown the door, as they should be. Musk isn't going to keep people around who won't improve the product and value.

Twitter employees who realize a big gain on their stocks or options, it won’t affect whether or not they have to pay estimated taxes.

More questions for you guys. Since the sale hasn’t happened, just been approved and the stock is around $49, if memory serves me. Does that mean that no one in their right mind would pay more than the $54 for the stock at this point?

Is it still tradeable? I would think that at this point, you wouldn't be able to trade the stock anymore as the deal was being cemented.

The risk of buying it right now is that the sale doesn't go through.

Why wouldn’t you be able to trade it currently, based on a potential deal? There’s no guarantee it will actually happen.
Yes, no one in their right mind would pay more than $54 right now. There’s some scenarios where ultimately the price goes higher, but imo those are remote, at least on what is currently known. I don’t think anyone would make that bet.

I had some Dell stock in a brokerage account when it went back private. It was just converted to cash automatically.

Regarding being an employee at a tech company, usually you get RSUs. They vest over time, usually a 4 year period after grant. Stock you already have granted will convert to cash and you will owe taxes for capital gains if applicable. You will already have paid income tax at the time the stock was granted.
RSUs that are not vested often accelerate, meaning all RSU become immediately vested at the time of sale and are converted to cash. This is likely where the "tax burden" comes from that was mentioned previously.
That said, RSUs can also be structured where they continue to vest on the same schedule but are just paid out as cash at the company sale price.
Worst case is that unvested RSU are canceled. If that's done, there would likely be another bonus program replacing them. In tech companies a lot of compensation can be in the form of RSU, so no software engineer is going to hang around for a base salary with a 401k match. ;)

Interesting thought

My company was recently sold to a private equity firm and will take the company private. The sale, pending approval, is in Nov/Dec of this year. The stock was trading at $10/$11 per share. The buyer offered $20/share. The day of the announcement, stock jumped. Weeks have past and the stock is trading just above $17/share. I wondering if this is a buy - I also wondering about the risk if the sale doesn't go through.

Ummmm...yeah, you get a windfall, you are going to....get taxed on it. So what? I've written a few beefy checks to the IRS....I was happy to do it. :D

It can be traumatic for folks that are not diversified and the one stock they hung their hat on is sold forcing them to cut that fat check and change all of their financial plans.

That said, some folks hung their hat on Enron stock.

^^^ Enron will not disappear from my statements :D

LOL ...

Just like spambots on PPOT...

-KFC