Hi Stachians
Excited to write my first post. I have a very first world dilemma, and I’m curious to hear your input.
A few years ago I went to work for a startup as one of the first employees and was lucky enough to get a little piece of equity. The company has since taken off in fairy-tale fashion and eclipsed everyone’s wildest dreams. The company is still pre-IPO but may go public in a year or so.
My shares are currently worth 7.5M on paper. I know... very lucky! This number is according to an investment bank the company hired to do a valuation. Of course, there is no liquid market for the shares, so emphasis on “on paper”.
However, it looks as if I might have the opportunity to sell some or all of my stake to a private investor at a bit of a discount. Approximately 5.5M is the ballpark figure that this party would pay for the full stake (25% discount from current FMV). After taxes (capital gains, thankfully), that would be 4M in my pocket, give or take.
My current financial situation: Have 1.85M stache, recently retired, mid 40s. Spending about 3 - 3.5%.
Company outlook: Profitable, semi-stable, semi recession-proof. Definitely a lot of risk but it’s not like late-90s .com-level risk. Internally (I’m still close friends with some of the executives) the outlook/forecast is bullish. The insiders believe the inevitable IPO will fetch valuations 1.5-2 times the current valuation. On the one hand, they are smart and have good reason to believe that. On the other hand, they’re still in the company bubble and have a bullish bias.
So…suppose the IPO sees a valuation 2x the current and I don’t sell now. Then, at IPO time, I’m looking at 15M pre-tax and 11M post-tax. But maybe it goes 3x, or 5x, etc. Or maybe 0.1x, who the hell knows?!
Anyway…I’m trying to decide how much to sell now to this interested party. I’m leaning towards half. That would mean 2M in my pocket (post-tax) now and take a flyer on the rest. But part of me thinks that’s crazy; that I should thank my lucky stars and just take the full 4M now. The risk of that is FOMO if it ends up that I could’ve had 20M or whatever down the road. Is that going to bother me? I don’t know. My insider friends think I'd definitely be leaving money behind by selling at this discounted valuation.
Like I say, first world problem. How much would you sell now? 0? 1/4? 1/2? All of it?
Thanks in advance for your perspective.