| Be very careful of an all-stock transaction. I had to pay a lot of money out of pocket to the IRS for shares in a company I couldn't sell. I found out the hard way that restricted stock stays restricted until the company officially releases it to you (via a letter from their CFO, etc), even if you already satisfied the requirements to release the restriction per the terms of the deal (SEC restrictions, contract obligations, earn out, etc). Apparently this is a grey area and the company is under no obligation to release the stock. Most brokers won't touch restricted stock with a ten foot poll. They tell you that you have to speak to their special division about restricted stock. And then they want to charge you to help you get it unrestricted and even then, there are no guarantees. Stock is just a piece of paper until you can put it into a brokerage account and sell it. You MUST understand exactly what it will take to be able to sell that stock and who it will hinge on and when. To add an additional headache, if you're still working for the company this complicates it even more depending on your role with the company. TL;DR I received stock after my company was sold, I had to pay tax on that stock as if it were cash in the bank, now I can't even sell the stock due to ambiguous rules. And the worst part is, even if I could sell my stock at this point, it wouldn't even cover what I paid in taxes. You live, you learn. Rant over ;-) |
Thanks for that awesome bit of info. I've always assumed stock options are better because it raises the purchase price of a company in comparison to an all cash sale. I guess even if the purchase price is lower, money in your bank is always > paper money.