How does this work, and how is it legal?
The article doesn’t say so but it might be part of bankruptcy proceedings or something similar. The company is sold off to pay debts but there isn’t enough money to pay everyone, debts are paid off in a legally determined order, and stock or option holders aren’t near the front of the line. I know folks who worked for First Republic and lost all their stock and options (and accrued vacation time, which is also apparently a debt) like that.
That’s right, the bond holders get paid first because those are loans. The preferred shares get paid next because those are basically higher yielding bond equivalents.
That’s the only way this makes sense.
*There are usually laws that the first debt in line is unpaid wages. I’m surprised that vacation time wouldn’t be included in that. Employees’ stock and options though are the same as any other stock: worthless.
In usa laws only protect rich people
Maybe?
Can you just sell right now in the least? Like if you were quick enough, would it be possible? I guess not.
Who would buy it? The minute they announced this deal the value effectively went to 0.
What the fuck? How is that even legal? Aren’t stocks supposed to be ownership stakes in the company? How can they just take that away?
In a liquidation sale, common stock holders only get paid if there is money left over after everyone else gets their cut. Creditors, bondholders and preferred stock holders are ahead of them in line.
It’s also worth pointing out that the company is not publicly traded, it’s privately owned, so in effect the shares were always worthless. It’s not clear to me if they were actually ownership shares or just options against the possibility of the company going public at some point in the future.
Creditors, bondholders and preferred stock holders are ahead of them in line.
I can’t believe capitalism still keeps surprising me with how fucked up it is.
It’s not clear to me if they were actually ownership shares or just options against the possibility of the company going public at some point in the future.
See above.
Because fuck you plebe!
I want off this earth guys.
Don’t worry, considering the path we’re headed down none of us will be here for much longer ¯\_(ツ)_/¯
Often common stock implies the existence of preferred stock, i.e. the investors got paid out in low sale and everyone else had no money available. The increasingly dominant private equity corp biz probably got a great deal. The class divide widens as usual
I tried researching this a bit, and from what I understand, the company basically has no money, which in turn makes the stock worthless. So since the stock is effectively $0.00 per share, they can just “cancel” the stock completely.
This could be oversimplified or dead wrong, but I don’t understand any other way this could work legally.
I think that’s how it’s been justified but the company just sold so it’s not worthless anymore right? Can’t have it both ways.
That’s exactly correct. The only caveat is if it’s paying off debt but it sounds like a good old fashioned screwing.
Reading into this it’s likely a distressed asset sale, a bankruptcy in all but name. They’re toast and they know they’re toast, but instead of bankruptcy they sell all the assets. They then use the money to pay off in order: wages, debts, preferred shares, common shares. Sounds like this is preferred over bankrupty, which when you get the courts involved is expensive and time consuming (so fewer debt holders get their money).
song as old as time
Tale as old as rhyme
Capitalism and the diseaseSo then they can try a class action, accuse ownership of some kind of impropriety. Might as well go for it, at least the lawyers will make some cash.
Mama mia!
This place has gross drinks. No idea how they stay in business.
