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Buying a companies stock


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#1 Inheritor

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Posted 31 December 2012 - 12:43 AM

I bought 30,000 shares of stock in a company. About three months later it was taken off the market and privately held. About 2 years 3 months later, the owner was putting it back on the stock market and said that it would return at about 10x the old price.

When it returned on the market, it was about 10x the old price. He started it under a new symbol and said my 30,000 shares were now reduced to 300 shares of the new symbol. That devalued the original purchase by about 95%. Of course, I threw a fit.

Owner stated that he'd be happy "to buy back any of the previous shares at the original price". I said I want my money back but reserved the option to file a lawsuit. It was like lending the owner 40k for 2yrs 3 months at zero interest. I got back my orginal 40k.

Owner states that he'd pay a flat rate of 10%, 4k in interest. I told him to keep that because it was not any part of the deal.

At one point he told me that my 30,000 shares of stock rose to 300,000 shares but will not honor that either.

He said later that once he puts the stock back on the market again for the third time, I would be free to purchase again. I told him what he could do with his stock. but, that leads to a question:

You put stock A on the market for $1.00 a share. It goes private. 2years later you go back on the market. You cancel stock A and issue stock B for $7 a share. You will only refund Stock A @ $1.00 a share.

So, Stock B goes off the market. But if I had bought 1,000 shares of stock B for $7,000, what is going to stop him from cancelling stock B in another 2 year and refunding the $7,000 and issuing stock C when it is now going on the market at $20 a share?

Is that legal??

#2 Tax_Counsel

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Posted 31 December 2012 - 03:46 AM

Is that legal??


That depends on what the corporation’s charter and bylaws say, the terms and conditions of the class of stock you hold, the terms of any shareholder agreement(s), the rules of any stock exchange on which the company is listed, and the law of jurisdiction where the corporation is organized (and you didn’t state where that is). It is certainly possible that the corporation was permitted to do what it did, but without reviewing all the documents involved and knowing the jurisdiction in which the corporation is organized, I cannot say if the corporation did anything wrong in your situation. You’d want to take the various documents to a securities law attorney for a review of the documents and legal advice.

#3 Guest_FindLaw_Amir_*

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Posted 31 December 2012 - 11:44 AM

I agree with the previous poster, this is a matter you may wish to discuss with a local Securities Lawyer to advise you further in detail.

#4 disabled4life

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Posted 31 December 2012 - 12:04 PM

You put stock A on the market for $1.00 a share. It goes private. 2years later you go back on the market. You cancel stock A and issue stock B for $7 a share. You will only refund Stock A @ $1.00 a share.

So, Stock B goes off the market. But if I had bought 1,000 shares of stock B for $7,000, what is going to stop him from cancelling stock B in another 2 year and refunding the $7,000 and issuing stock C when it is now going on the market at $20 a share?

Is that legal??


I was curious myself and found the following, not sure if it helps:






"This depends on local law, but generally you can only take a company private if enough shareholders agree. Only then is it possible to squeeze out the remaining shareholders like you describe. Otherwise, if someone offers $2 per share, I can flat out refuse it regardless of the marketprice. –


but it simply means that you get money in your bank account for the shares in question the same as if you were to sell them for that price (in turn possibly triggering tax effects, etc.). I imagine that this is by far the most common approach.




The other possibility is that the stock is simply de-listed from a public stock exchange, and not re-listed elsewhere. In this case, you will still have the stock, and it will represent the same thing (a portion of the company), but you will lose out on most of the "market" part of "stock market".
That is, the shares will still represent a monetary value, you will have the same right to a portion of the company's profits as you do now, etc., but you will not have the benefit of the market setting a price per share so current valuation will be harder. Should you wish to buy or sell stock, you will have to find someone yourself who is interested in striking a deal with you at a price point that you feel comfortable with.


#5 Inheritor

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Posted 25 January 2013 - 12:00 AM

Can someone refer me to a top notch SEC attorney in Ohio that might want to take on a case?
I'm in central Ohio, Fairfield County




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