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The situation is this: back in the early 2000s, my wife started working for a small-ish, unlisted, IT/financial services company in London. At that stage, they gave every employee stock options, which she exercised, getting 500 shares for something like 5p each. The company is now big and successful. Those 500 shares have been paying out dividends of between 500 and 1,000 GBP per year. Over the past few years, there have been rumours and visible steps towards the company going public, although my wife no longer works there, so isn't fully in the loop. So, knowing very little about IPOs, I have a ton of questions, like: 1. Is it worth holding on to the shares for the dividends, or selling them off in the IPO? 2. Is there a way to estimate the value of the shares (like, say, based off the size of the dividend)? 3. Hell, what should we know about (or try to find out about) when/if the IPO gets announced, and during the event itself? (What other questions should I be asking that I don't even know to ask)? I should add that we currently have a few thousand dollars worth of debt, and no savings (though this will be changing very soon when I cease being a PhD student and my salary more than doubles).
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Sep 15, 2014 07:14
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Well in a perfect world the present value of all future dividends will be the stock price at the ipo.
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Sep 15, 2014 07:31
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Most stock dividends are in the 1-2% return range. Working backwards, roughly, worst case, more caveats here, the shares would be worth about 25k. Maybe more. She may be restricted from selling for the first 6 months (I'm not sure), that's how it is in the US for some employees. So check up on that. That also means that after 6 months there is usually a dip in the price because of all the employees rushing to cash in. She should have been getting a yearly stock report. She should also be getting a copy of the IPO filing mailed to her. If you don't have it, contact the company and ask when to expect it, or to have one sent. (eta: if they haven't filed they won't be able to say anything.) I'm in the US, but can't imagine the UK being all that different. Bottom line, it depends on if you need the money (doesn't look like it). I'd probably sell at least a little of it (5k), a few weeks or months after the IPO. The rest of it would depend on how stable/growing the company is.
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Sep 16, 2014 21:03
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You'll have to figure out exactly what the rules are for divestment, and decide if the IPO is likely to give you a large return. But in the long run, you and your wife should not have most of your savings/net worth tied up in the stock of the same company she works for. This is the opposite of diversification. If that company tanks for any reason, you are double-exposed; your savings take a hit at the same time that her employment takes a hit. And before you start talking about how big/reliable/reputable the company might be, you need to understand that companies can tank for tons of different unpredictable reasons. It could be corporate malfeasance (enron), a big expensive accident (BP), or simply getting upstaged by a competitor in an unrecoverable way (Palm, RIM). So you need to understand the tax consequences, the likely upside/downside, etc., but over the next couple of years if not before then you should be divesting yourselves of most or all of that stock. Get it invested into whatever tax-shelters your country offers, into a basket of low-cost broad-market mutual funds and bond funds.
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Sep 17, 2014 04:17
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Thanks, that's very helpful. I'll look into the tax implications, as well as any restrictions. I don't think there will be any since my wife is no longer an employee, so now she's just a regular shareholder. That also sounds like a good idea to sell a chunk of the shares and reinvest them elsewhere for better diversity. Anyway, there's no official announcement of an IPO yet, just signs that it'll happen: rebranding, rumours, some fuckery involving moving the company to a holding company with a different limited status to remove the requirement for disclosing certain financial details in the event of an IPO.
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Sep 17, 2014 19:23
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