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I'd appreciate any advice. I've got a really nice offer on the table, which I can take up anywhere from 0% to 100%.
My context:
* I'm currently CEO of a small-ish company, which is being bought by a slightly bigger company
* Post-acquisition, I'll be CEO of the acquiring company (also private)
* I've already negotiated my new contract, but am still uncertain what to do about this offer.
* As part of my offer, the founder/non-executive chairman of the acquiring company has made a portion of his personal allocation of a Convertible Notes issue available to me to purchase as my long-term incentive in my new job.
Financial context:
* I'm young(-ish) and have had a very rapid salary growth over the past decade.
* As the result, my net worth has always been low compared to my current salary
* I've got about $200K cash and another $200K sitting in the stock market. No debt, but no house or other real assets.
* My salary/average bonus will be around $300K/year with the new contract.
The notes
* These notes were issued in 2009 when the acquiring company was valued at $X to senior management. The owners bought the remaining portion of allotments that management did not take up.
* Today, the company is worth about 300-400% more than X by my calculations (conservative)
* They don't have a warrant right but come with a 10% annual interest, paid quarterly.
* They can be converted to common stock at the X valuation.
* They've already extended the conversion about 4 times (e.g. not calling it in and continuing to pay interest) and will likely do so at least a few more times.
* If I'm fired or leave the company, they're obliged to buy back the notes at par value (what I'd be paying at the 2009 price)
* However, if the company goes bankrupt, convertible notes are of course unsecured debt so they'd be worth nothing.
Advice needed
* I can buy up to $175K of this debt. But as you can see above that's over 40% of my net worth.
* Normally, that'd be a clear "too risky" flag, but there are some ameliorating factors. One of course that I'd be running the company and can control my own destiny to an extent, the other being the extremely attractive offer of buying these at a third of current valuation price and with the 10% interest carried on this debt.
* If called, the resulting shares would amount to around 3% of the company.
* At the moment my thinking is just to buy all $175K worth of notes and take the risk with my reasoning being: I'm still young and can bounce back from a worst-case scenario and that I'm unlikely to have access to a deal this good any time soon again (ever?)
* It's just a lot of money for me so anyone else's thoughts would be really appreciated before I buy these.
My context:
* I'm currently CEO of a small-ish company, which is being bought by a slightly bigger company
* Post-acquisition, I'll be CEO of the acquiring company (also private)
* I've already negotiated my new contract, but am still uncertain what to do about this offer.
* As part of my offer, the founder/non-executive chairman of the acquiring company has made a portion of his personal allocation of a Convertible Notes issue available to me to purchase as my long-term incentive in my new job.
Financial context:
* I'm young(-ish) and have had a very rapid salary growth over the past decade.
* As the result, my net worth has always been low compared to my current salary
* I've got about $200K cash and another $200K sitting in the stock market. No debt, but no house or other real assets.
* My salary/average bonus will be around $300K/year with the new contract.
The notes
* These notes were issued in 2009 when the acquiring company was valued at $X to senior management. The owners bought the remaining portion of allotments that management did not take up.
* Today, the company is worth about 300-400% more than X by my calculations (conservative)
* They don't have a warrant right but come with a 10% annual interest, paid quarterly.
* They can be converted to common stock at the X valuation.
* They've already extended the conversion about 4 times (e.g. not calling it in and continuing to pay interest) and will likely do so at least a few more times.
* If I'm fired or leave the company, they're obliged to buy back the notes at par value (what I'd be paying at the 2009 price)
* However, if the company goes bankrupt, convertible notes are of course unsecured debt so they'd be worth nothing.
Advice needed
* I can buy up to $175K of this debt. But as you can see above that's over 40% of my net worth.
* Normally, that'd be a clear "too risky" flag, but there are some ameliorating factors. One of course that I'd be running the company and can control my own destiny to an extent, the other being the extremely attractive offer of buying these at a third of current valuation price and with the 10% interest carried on this debt.
* If called, the resulting shares would amount to around 3% of the company.
* At the moment my thinking is just to buy all $175K worth of notes and take the risk with my reasoning being: I'm still young and can bounce back from a worst-case scenario and that I'm unlikely to have access to a deal this good any time soon again (ever?)
* It's just a lot of money for me so anyone else's thoughts would be really appreciated before I buy these.
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