[ucha]

There are two main ways to force existing shareholders to sell:

1. You buy 51% of the shares (and voting rights), make an offer to buy the remaining 49% and call for a shareholder meeting to vote on the offer. You have the majority, vote yes, and acquire the company.

2. You acquire 90% of the shares. You don't even have to call for a shareholders vote; you can acquire the company immediately and squeeze out existing shareholders who are forced to sell and the offer price.

You can either acquire shares by submitting a tender offer (offering to buy shares at a specified price from shareholders) or tapping the public markets (and disclose it). If you think about this a bit more, you'll see there are ways to game the system by, for example, buying enough rights then making a low-ball offer but most of the loopholes are well covered by corporate law.

To address your complaint on fairness, yes, you can be forced to sell because if most of the shareholders want to take the company private, it would seem fair from the majority's standpoint to accept its rule. Not perfect but I don't think there exists a better mechanism.

[pedrocr]

>To address your complaint on fairness, yes, you can be forced to sell because if most of the shareholders want to take the company private, it would seem fair from the majority's standpoint to accept its rule. Not perfect but I don't think there exists a better mechanism.

Why not just allow the option to let the company go private but let these stockholders retain their minority holding? If you, like the PE firm, think the company is undervalued by at least 20-30% why can't you just retain ownership through the deal and receive your proportion of dividends?

[ucha]

It's a good observation. Private companies with more than 500 shareholders have to obey a different sets of rule from those with fewer owners and must disclose financial performance in a way similar to that of public companies. Most of the time, you'd except to have more than 500 small shareholders that won't willingly sell.

[spinlock]

because you aren't a qualified investor and the SEC mandates certain obligations that the company must comply with to have you as an owner.

[ucha]

The company cannot solicit or sell non-accredited investors securities but they can remain owners if securities where previously purchased.

http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8edfd12967d...

[spinlock]

That is the greatest rebuttal of all time. There's no way I'm going to read that page so, instead, I'll just thank you for your diligence and be on my way.

[amag]

I agree, I'm going to save that URL for any future discussions on HN regarding anything.

[belltaco]

Not so fast on #1 and #2. You're required to inform the company and the public if you're gathering up a high number of shares, and you need to declare an intent for hostile takeover, and there are rules around that.

You can't simply start accumulating shares silently on the public markets and then suddenly declare one day "I own 51% shares and now all your shares are worth 1 cent each muahahah!!!"