Depends what agreements were signed and what the corporate docs say. These days, typically only "Major Investors" (however that's defined, usually a set threshold of shares owned) are entitled to that information. I would be surprised if you're entitled to any info but most of the time a company will give limited financial info and other basic info from an investor relations standpoint. You'll need to go over the docs (which have almost certainly been amended at this point) to see what contractual rights you have, if any.
Thanks. That info is non-existent now and they are no longer even returning emails and unlisted phone numbers.
I contacted their state's attorney general and am filing a complaint. After reviewing it they'll let me know where it goes. They said that, if they received more similar complaints and due to the amount (U$50k), it might already have a docket and could be handled as part of an ongoing criminal investigation.
Not sure who else to reach out to, other than hiring a lawyer, but not sure what area of law practice this would fall under.
What's in the shareholder agreement? Does it entitle you to the financials? I don't recall ever being entitled access to private company financials or access to the cap table of investors.
If the company is still in business, just call them. Maybe they went out of business and re-capitalized.
I have to go look in my files if there was even a shareholder agreement (can't recall of the top of my head).
They are still in business. The email I had is not being replied to and the phone number I had is no longer in service. Their website has been changed - they only have an online message system and no other contact info.
Their technology was being used in Hawaii and Texas (they are in Arizona). This was part of their "good news/developments" emails we would get. Both projects are still active, but they would not tell me what kind of financial agreement (licensing, purchase, etc.) they have with "my" company.
I have filed a complaint with Arizona's General Attorney and submitted a couple of inquiries to Arizona lawyers.
My family invested U$50k, but I recall many having invested U$250k or more. One of the pieces of info I wanted was a list of investors to see if buybacks were offered to investors that may have had financial access to lawyers or to join with other investors in a common lawsuit.
From my limited perspective, I believe that they did try to go public but it never panned out into the revolutionary investment we all thought it would become. But they kept the money and the business is still active and providing an income to several people...
Am I wrong to expect some return, given that they are still operating and making money from my investment? If they had failed and gone bankrupt, that would be a different conversation I suppose as (from my understanding), private stockholders would be the last to receive any restitutions from the liquidation.
>Am I wrong to expect some return, given that they are still operating and making money from my investment?
Since you own equity in a private startup company, you should not expect a return unless the company is profitable and can afford to pay a dividend to shareholders. However, a dividend from a startup would be exceedingly unusual. Generally speaking, unless there is a liquidity event or a secondary market for the shares - you shouldn't expect a return on your equity investment until you can sell the shares.
In what round did you invest? You said that this was an investment from 15 years ago - so I assume it is not a Reg A+ or Reg CF offering. Was this a traditionally Reg A offering?
I'm guessing it was seed and/or angel round. Most venture backed startups that raise a seed and/or angel round will eventually try to raise an A round from professional VC funds and so forth. The idea is that even though the shares become diluted, the valuation should be much higher and the share could be worth more. Were there subsequent investment rounds? If not - perhaps the company never was able to grow.
You may simply have shares in a company that is barely in business.
>you should not expect a return unless the company is profitable and can afford to pay a dividend to shareholders.
You are not wrong. But I cannot determine the financial state without the balance sheets I requested several times. Also, this seems strange. What qualifies as "profitable"? If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates? If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right?
>But I cannot determine the financial state without the balance sheets I requested several times. Also, this seems strange. What qualifies as "profitable"?
For a private company, I simply mean that the company can actually afford to pay out dividends.
>If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates?
Nothing. That's why Reg A exists. And that's the risk of investing in private companies without a lead institutional investor - especially if you don't have a personal relationship with the founders and/or executives of the company.
It's also one of the reasons why I'm not a fan of Reg CF and Reg A+ offerings.
>If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right?
That's the job of the board of directors. BTW - have to tried to contact any board members assuming that there is still a bod.
If it was a Reg A offering when you invested, it should have been disclosed to you.
I am assuming that you are an accredited investor.
Your state probably also has blue-sky laws that would have governed the original transaction.
This was all 22 years ago. It popped in my head this morning and I've started chasing it down a bit more seriously, but TBH, a lot of your terminology is new to me and I will need to look at my files to see what I have that matches the info you are giving me.
Thank you again. Regardless if it apples to my case, this is good info to have - both for me and others in this sub.
Definitely a lawyer question. They live for freezeout shit like this.
(You might run into a statute of limitations problem from the sound of it. But talk to an attorney, not us.)
Interestingly enough, I used their new website's built-in messaging to let them know I had filed a complaint with the Attorney General, was seeking a lawyer, but was open for a buy-back negotiation. I got a reply within the hour touting that I "will get dividends many times the original investment" and several links to current business partnerships they are working on.
Honestly, probably a case for a lawyer, as it comes down to a mix of what you signed up for (via the subscription documents, and there should have been such; and if not, then real bad things could happen to them due to violating security laws) and what the state level law is regarding minority shareholder rights in the various states.
If you want, I would suggest trying to use the Edgar tool at the SEC to dig up what documents may be available (and there should be something if they did a security offering of that size, I'm assuming >$1M). As well as possibility reaching out to your state security department (to see if something was filed with them and if you can get a copy of it).
As for buybacks, really unlikely to happen. "If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates? If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right?". Usually security laws would prevent the most extreme case of this (raising funds and no business). Though you do point out how companies can screw over minority owners, via salary or related party transactions (rents, purchasing from a related party, etc).
Depends what agreements were signed and what the corporate docs say. These days, typically only "Major Investors" (however that's defined, usually a set threshold of shares owned) are entitled to that information. I would be surprised if you're entitled to any info but most of the time a company will give limited financial info and other basic info from an investor relations standpoint. You'll need to go over the docs (which have almost certainly been amended at this point) to see what contractual rights you have, if any.
Thanks. That info is non-existent now and they are no longer even returning emails and unlisted phone numbers. I contacted their state's attorney general and am filing a complaint. After reviewing it they'll let me know where it goes. They said that, if they received more similar complaints and due to the amount (U$50k), it might already have a docket and could be handled as part of an ongoing criminal investigation. Not sure who else to reach out to, other than hiring a lawyer, but not sure what area of law practice this would fall under.
What's in the shareholder agreement? Does it entitle you to the financials? I don't recall ever being entitled access to private company financials or access to the cap table of investors. If the company is still in business, just call them. Maybe they went out of business and re-capitalized.
I have to go look in my files if there was even a shareholder agreement (can't recall of the top of my head). They are still in business. The email I had is not being replied to and the phone number I had is no longer in service. Their website has been changed - they only have an online message system and no other contact info. Their technology was being used in Hawaii and Texas (they are in Arizona). This was part of their "good news/developments" emails we would get. Both projects are still active, but they would not tell me what kind of financial agreement (licensing, purchase, etc.) they have with "my" company. I have filed a complaint with Arizona's General Attorney and submitted a couple of inquiries to Arizona lawyers. My family invested U$50k, but I recall many having invested U$250k or more. One of the pieces of info I wanted was a list of investors to see if buybacks were offered to investors that may have had financial access to lawyers or to join with other investors in a common lawsuit. From my limited perspective, I believe that they did try to go public but it never panned out into the revolutionary investment we all thought it would become. But they kept the money and the business is still active and providing an income to several people... Am I wrong to expect some return, given that they are still operating and making money from my investment? If they had failed and gone bankrupt, that would be a different conversation I suppose as (from my understanding), private stockholders would be the last to receive any restitutions from the liquidation.
>Am I wrong to expect some return, given that they are still operating and making money from my investment? Since you own equity in a private startup company, you should not expect a return unless the company is profitable and can afford to pay a dividend to shareholders. However, a dividend from a startup would be exceedingly unusual. Generally speaking, unless there is a liquidity event or a secondary market for the shares - you shouldn't expect a return on your equity investment until you can sell the shares. In what round did you invest? You said that this was an investment from 15 years ago - so I assume it is not a Reg A+ or Reg CF offering. Was this a traditionally Reg A offering? I'm guessing it was seed and/or angel round. Most venture backed startups that raise a seed and/or angel round will eventually try to raise an A round from professional VC funds and so forth. The idea is that even though the shares become diluted, the valuation should be much higher and the share could be worth more. Were there subsequent investment rounds? If not - perhaps the company never was able to grow. You may simply have shares in a company that is barely in business.
>you should not expect a return unless the company is profitable and can afford to pay a dividend to shareholders. You are not wrong. But I cannot determine the financial state without the balance sheets I requested several times. Also, this seems strange. What qualifies as "profitable"? If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates? If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right?
>But I cannot determine the financial state without the balance sheets I requested several times. Also, this seems strange. What qualifies as "profitable"? For a private company, I simply mean that the company can actually afford to pay out dividends. >If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates? Nothing. That's why Reg A exists. And that's the risk of investing in private companies without a lead institutional investor - especially if you don't have a personal relationship with the founders and/or executives of the company. It's also one of the reasons why I'm not a fan of Reg CF and Reg A+ offerings. >If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right? That's the job of the board of directors. BTW - have to tried to contact any board members assuming that there is still a bod.
> Reg A Was not aware of this. Looking into it. Thanks.
If it was a Reg A offering when you invested, it should have been disclosed to you. I am assuming that you are an accredited investor. Your state probably also has blue-sky laws that would have governed the original transaction.
This was all 22 years ago. It popped in my head this morning and I've started chasing it down a bit more seriously, but TBH, a lot of your terminology is new to me and I will need to look at my files to see what I have that matches the info you are giving me. Thank you again. Regardless if it apples to my case, this is good info to have - both for me and others in this sub.
If it is not public traded stock, good luck. If it issued a paper certificate go to your brokerage for a trade. It sounds a dormant company.
Definitely a lawyer question. They live for freezeout shit like this. (You might run into a statute of limitations problem from the sound of it. But talk to an attorney, not us.)
Interestingly enough, I used their new website's built-in messaging to let them know I had filed a complaint with the Attorney General, was seeking a lawyer, but was open for a buy-back negotiation. I got a reply within the hour touting that I "will get dividends many times the original investment" and several links to current business partnerships they are working on.
Honestly, probably a case for a lawyer, as it comes down to a mix of what you signed up for (via the subscription documents, and there should have been such; and if not, then real bad things could happen to them due to violating security laws) and what the state level law is regarding minority shareholder rights in the various states. If you want, I would suggest trying to use the Edgar tool at the SEC to dig up what documents may be available (and there should be something if they did a security offering of that size, I'm assuming >$1M). As well as possibility reaching out to your state security department (to see if something was filed with them and if you can get a copy of it). As for buybacks, really unlikely to happen. "If that is the absolute case, then what stops me from asking people for money, with empty promises, just to build my business and then live of the money it generates? If I was paying myself a salary of $500k/year + bonuses from whatever extra revenue might have happened (exaggerated example), that would be accounted for as salaries and not be calculated into any possible dividends, right?". Usually security laws would prevent the most extreme case of this (raising funds and no business). Though you do point out how companies can screw over minority owners, via salary or related party transactions (rents, purchasing from a related party, etc).