NJSBA Family Law Section

Looking for Opinions:   Husband uses $255,000 of vested restricted stock to invest in a private company where he is employed. He receives an equity interest of .03% in company. Stock value goes down about 50% at the time parties' commence mediation (the cut-off date). The company is actively seeking a new equity investor and/or a buy-out, which may happen over the next three (3) years (per Husband's representations). Of course, the value of Husband's equity interest may increase substantially or decrease over the next three (3) years or thereafter and there is no guarantee there will be a future investor or a buy-out.

Wife could receive a settlement of 50% of the $255,000 of the stock invested (after-tax value); or she could receive 50% of the current after-tax value of the stock; or she could receive a percentage of Husband's equity interest  in company, hoping that Husband's equity investment increases in value. Husband, of course, wants to buy-out Wife's interest now and Husband emphatically will not agree to Wife retaining any interest in his equity investment. There is no public prospectus' for the company as it is privately held so no way to research company performance . The company's internal, equity projections seem artificially inflated, because the company is actively seeking private investors and/or a buy-out. This is a mediated case so there will be no depositions of parties or employers.

What's a Mediator to do?

Faith     

Faith A. Ullmann, Esq.

Certified Matrimonial Law Attorney

Faith A. Ullmann & Associates, LLC

97 Main Street,

Newton, New Jersey 07860

(973) 579-9700 (Phone)

(973) 579-9707 (Fax)

[email protected] (Faith's email)

www.faudivorcelaw.com (Firm Website)

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Faith, 255k for .03% ? so that values company at roughly $90,000,000. So company has some sales and is viable ongoing concern. Have you pulled the 10-k report?

Is the 50% cut in stock price a last money in round B or angel valuation? 

Making some assumptions, my experience with start-ups and pre-publicly traded and private companies, unless you are the deep pocket you are going to get crammed down, I would recommend to my client based on the information you give to take the buyout and get the tax bene, even at the 50% valuation, so long as the value is based on verified money-in.  

Tom King

Thomas R. King, Esq

O: 973-750-8348 Fax: 888-576-8997
www.njfamily.law - www.njdivorce.law

45 Broadway, 2^nd floor, Denville NJ 07834

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