Print Story Update to unemployment disaster: like you all care.
Just last week I was bitching and moaning that the startup I work for was going under completely, leaving me to live out of a cardboard box. Well, there is news! But who the hell knows what it means...


Jeff, the DC investor finally backed out completely. I figured this was probably the case when he was blowing off conference calls with Mike (founder of our company, CEO, whatever).

So, Mike and the others are getting desperate. And something that had been kicked around for a long while non-seriously was now on the table. Forgive me if I explain any of this wrong, I don't know what I'm talking about here, just repeating things I've heard half-assedly.

It's called a "reverse IPO". Some other corporation that has went public, bit the dust, and exists only in lawyer's paperwork. You end up buying said company, offering stock for your formerly non-public company through it. Moreso, there are companies that specialize in this sort of thing (and we sure as hell can't afford to be buying anything).

So they get 10% (I think, may have misheard) of our company, and in 3 months they've got things ready to be selling shares of our company. Another 10% of it or so, for $2.5 million. In the meantime, they agree to front us operating capital (whether this was at a level where I get my salary back no one bothered to tell me). Also, if things aren't ready in 90 days, they continue to pay operating expenses until they are.

It all sounds fishy to me. It smacks of desperation, and I wonder how likely we are to land the big deals with the record companies that are in the works if we look desperate.

They're talking as if the ipo thingy deal will be finalized by the end of November.

I continue to look for another job.

Mike's in California. Supposedly we still have a good shot at landing a deal with Warner Music (and another similar with Sony) that could be worth a million or so revenue per touring season.

If this does go public, do I sell my 10,500 stock option shares as soon as I can, or hang on to them? Lots of music startups have failed these past few years, why would ours be different?

< Photo Fun Challenge 5 nag diary | BBC White season: 'Rivers of Blood' >
Update to unemployment disaster: like you all care. | 13 comments (13 topical, 0 hidden) | Trackback
If that happens by ad hoc (4.00 / 1) #1 Mon Nov 19, 2007 at 05:14:59 PM EST
your option shares are worthless.
--
The three things that make a diamond also make a waffle.
How so? by NoMoreNicksLeft (2.00 / 0) #2 Mon Nov 19, 2007 at 05:24:34 PM EST
As long as the price is above the strike price, they'd be worth something right? Even if it were only a penny per.
--
Do not look directly into laser with remaining good eye.
[ Parent ]
Well, not so much "worthless" by ad hoc (4.00 / 1) #4 Mon Nov 19, 2007 at 05:34:06 PM EST
as invalidated. They won't be worth anything at all, at any price. Not even a penny. Not even part of a penny. They'll all be declared null and void by the agreement with the VC guys (or whatever you're calling them).
--
The three things that make a diamond also make a waffle.
[ Parent ]
IAWTad hoc by Breaker (2.00 / 0) #8 Mon Nov 19, 2007 at 10:23:20 PM EST
Those shares are worth what you can sell them for.

I doubt any institutional investor will touch them; if the liquidity is zero those shares can be valued at 1000 USD but if you can't sell them, they're worth nothing.


[ Parent ]
In my experience by ad hoc (2.00 / 0) #10 Tue Nov 20, 2007 at 04:59:51 AM EST
any sort of deal like the one he's talking about requires a capital restructuring of the company which will declare all previously issued stock and options worthless, null, and void. Certain key players (usually the CEO/owner) will have some new stock issued, but no one else will. I've seen this happen twice now.
--
The three things that make a diamond also make a waffle.
[ Parent ]
Ouch. by Breaker (2.00 / 0) #11 Tue Nov 20, 2007 at 05:23:04 AM EST
NT


[ Parent ]
So your company by ni (2.00 / 0) #3 Mon Nov 19, 2007 at 05:29:41 PM EST
would be paying $5,000,000 in value to get $2,500,000 in cash.

The idea is usually called a 'reverse takeover'. Normally I imagine it could be a good idea or a bad idea depending on the circumstances, but in a case where you're paying 200% of what you're getting, I'm no expect, but I'm thinking you're completely fucked.


"What woman wouldn't love a guy in WW2 aviator glasses eating their ass?" -- dest

Yeh, my understanding... by NoMoreNicksLeft (2.00 / 0) #5 Mon Nov 19, 2007 at 05:49:19 PM EST
Is that we're doing just that. $5 mil for $2.5mil cash.

But, we're seeing revenue already, it's just an order of magnitude low even for our barebones budget right now. Supposedly. I've heard the term reverse takeover too, but I get confused easily by all this bullshit.
--
Do not look directly into laser with remaining good eye.

[ Parent ]
Why not by ni (2.00 / 0) #6 Mon Nov 19, 2007 at 05:53:03 PM EST
get a loan? Or traditional private capital?

I suspect the reason is because the company is completely fucked, and no one but exploitive scammers will go near it. As I say, I really don't know much about these things (nor, as far as I know, does anyone on husi), but it seems to me that if the company was in solid financial shape, or had reason to think it would be in the future, you'd be able to get money far cheaper than that.


"What woman wouldn't love a guy in WW2 aviator glasses eating their ass?" -- dest

[ Parent ]
Supposedly... by NoMoreNicksLeft (2.00 / 0) #7 Mon Nov 19, 2007 at 07:05:37 PM EST
We got as much uncollateralized loan as they'd give us, and there's not much to collateralize (a fancy $600,000 printer, some other assets).

If we get a major deal, they'd throw more money at us. But at least some of the hesitation (supposedly) on the deals is that they worry we're not funded enough.

I wonder if the credit industry bullshit is making things harder. Does that even affect business credit?

But it's either find another investor, hope to catch a big revenue deal, or this. The other investors are nowhere near the end of the pipeline, and I think we've burned through all the big spenders. I dunno.

I keep self-editing. I probably have said way more than I should already. Blah.
--
Do not look directly into laser with remaining good eye.

[ Parent ]
Capital. by Breaker (2.00 / 0) #9 Mon Nov 19, 2007 at 10:28:06 PM EST
All of the big banks have had their arses handed to them, and the smaller banks are running out of ideas.  Even if it's not hit the headlines yet, I think most banks will be struggling to turn a profit this year.  They're battening down the hatches.

There will be no blue sky money being kicked about for a while yet; a lot of the banks have increased their cash reserves to cover their unknown exposure to sub primes.

NB: IANA Financial advisor, just work in the industry. 


[ Parent ]
If I were an editor here, by ambrosen (2.00 / 0) #12 Tue Nov 20, 2007 at 09:06:21 AM EST
I'd say I was going to delete your account if you didn't post a diary asking for help with your resume. Sure, it's hard to find work, but there's good people out here who'd be really happy to help you.

Muppet.

If I were an editor here, by ambrosen (2.00 / 0) #13 Tue Nov 20, 2007 at 09:06:36 AM EST
I'd say I was going to delete your account if you didn't post a diary asking for help with your resume. Sure, it's hard to find work, but there's good people out here who'd be really happy to help you.

Muppet.

Update to unemployment disaster: like you all care. | 13 comments (13 topical, 0 hidden) | Trackback