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0 pointsRedditKon5y ago0 comments

re: 1x participating

Straw man argument. 1x participating are standard terms. I'm not sure why any investor would forego using standard terms, even at the early stage, to their detriment.

re: "squeezing"

You're perfectly free to have that opinion. Clearly both firms with extensive investment experience did not feel that way.

re: "illegality"

I have no idea what parallel you're making here, or what "negotiating a price outside the valuation fo the shares" means. Financing documents typically make it very clear what rights each party has upon a financing event and/or exit event. Whether each party chooses to exercise that right is up to them. There is absolutely no reason to believe Josh did anything illegal here.

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jariel5y ago

>>> '1x participating' are the likely standard terms, meaning the investors should be getting their 1x out of this deal at least.

There's no 'straw man'.

>>> Asking for the 1x back on a sale is not 'squeezing' - it's literally in the contract, a normative part of these transactions. It happens all the time.

"Clearly both firms with extensive investment experience did not feel that way." - no, that they didn't 'go after the money' doesn't imply they would be 'squeezing' if they did. What it implies is that in all likelihood, it probably just wasn't worth the hassle.

The investors got robbed, but at least they can write it off. Asking for money from someone who is essentially refusing to give it back to you is not 'squeezing' by any definition.

>>> "Illegality" - in the article Josh mentioned that he had some kind of deal with the acquirer whereby 'not matter what, he would get his $3.7M'. If the acquirer is agreeing to terms with one 'insider shareholder' to the detriment of the others, that's fraud, and it's illegal.

Josh has a fiduciary responsibility to represent in good faith on behalf of all of the shareholders. Clearly in this situation, he came out with a nice exit, while his investors got $0. It also seems pretty clear that Josh and the acquirer were going to make sure that Josh was 'taken care of as part of the deal'.

Conrad Black went to jail because he was selling off assets of the company, but also getting a large 'consulting fee' from the acquiring entity to him personally. The shareholders felt that was defrauding them of what would otherwise be valuation/money they should receive.

In this companies transaction, it seems pretty clear that the investors were probably into it for $800K (participating) and then 15% or whatever they owned - but they got nothing.

He benefited while the other shareholders did not - this looks like it might illegal - but it probably would only be considered so if someone took them to court over it, which obviously they wont.

It's a fine line between 'negotiating hard' and simply saying 'I have your money, you're not going to get it, so that's that'.

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