Investing in Private Limited Coy

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Just activated... Appreciate the patients.
I was once approached for a pre-iPO deal and only started to consider more seriously when I was shown the financials. Fortunately with the financials and my risk appetite I did not take e plunge and ultimately the company until now has not IPO. Shareholders voted out the incumbent management and the company is currently undergoing restructuring. Whether success or failure, it is almost like going to casino and betting on a number on roulette.

Not that difficult to mess up a company.
(23-12-2015, 12:10 AM)Triple70 Wrote: An agreement can be called many names, its the contents of the agreement that matters.
Term sheet is just a brochere stating the specs, not legally binding or committed.

I agree with your first sentence but the second part is incorrect. A term sheet can either be legally binding or not depending on the content. That said, it will still usually be followed by a lengthier agreement with more details on the terms, conditions precedents and warranties, etc. 

Generally, if you are investing in private companies especially those run by non related parties, it would be advisable to do so via a loan agreement with equity kicker (CB is just one example). This is  so that you will rank ahead of the equity holders in the event of liquidation and yet still be able to participate on the upside. This is quite a common practice among investors, whether institutional or individual. However, if the company is run by your very good friends or relatives, I can see that you might have some problems requesting for such instruments. Usually, in those instances, other concerns may override monetary ones.  

The other thing to note is that for investments in private companies, judgement of the management and controlling shareholders' character is paramount. If someone is out to cheat you of your money, no amount of personal guarantees or contractual protection is going to save you even if the business is viable. Remember, a personal guarantee is only as good as the person giving it. Wink

Exit here might be IPO or acquisition by another firm.

[Image: private-company-life-cycle-thumb-570x375-64515.png]
You can count on the greed of man for the next recession to happen.
Own a part of china's unlisted rural / city banks - buy on Taobao !

Investors are shunning China's small banks despite half-price deals
Tue, Oct 15, 2019 - 5:50 AM     Shanghai  

TO SEE how little investors love China's small banks, look no further than the nation's largest online auction site.

On Alibaba Group Holding's Taobao platform, a Chinese court tried to auction off 1.5 million shares of a rural bank in the eastern Zhejiang province for a starting price of 1.15 million yuan (S$220,000) - about half their appraised value.

After three failed attempts over two months, the latest re-listing drew only about a thousand views.

And not a single bid.

That's not an isolated case. Since May 24, when the Chinese government stunned the market with its first bank seizure in more than two decades, there have been more than 1,400 attempted sales on Taobao of mostly unlisted rural and city bank shares. Even with deep discounts, over half the auctions failed to attract bidders in their first attempt, transaction records show.......

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