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28 Sep 2011

Buying Shares in an Unlisted Company

I have just started drawing my "well thought" strategy on buying stocks and bonds. All I have been doing was what I really cant explain. I do have some stocks, which earn me a few dollars in dividends. With the end of the month fast approaching and me being so nervous about implementing my strategy. Then boom! someone I respect so much sends me an email, presenting an opportunity for me to buy shares from her unlisted company. 

I was excited but that seemed like I am back to where I was before drawing my strategy. More research, more strategies, etc. Her company is also in real estate. I believe in her business concept, I like her model but I needed to do a lot of thinking and hubby chat. This is about $60,000 of my family savings we are talking about. Let me summarize her initial email.

"I was asked today by *company A* if I would consider selling shares in my company. My first instinct was YES, but immediately thought…. With WHOM? Please let me know if you are ever interested to take up shares in my company..." 
 I was so humbled that this experienced business person thought of me when approached by someone I imagined to be a bigger business person than myself. I then thought too fast, like I always do when overly excited. I called the hubby---- its great being married, it kind of cools you down a bit and gives the well needed time lag. And the fact that my hubby is not as impulsive and more on the averse side of risk helps. This time he too was excited. More excited for me to get some recognition and first option to buy. 
A few emails to and fro later, I got some details on what the business is doing. This was still exciting but the costs were changing per email. I think its just inaccuracies with calculating. I do trust this possible business partner, but I think I need to think some more. I told the possible partner that I am definitely interested. I later tried to calm myself so I can think netter. All the risks involved in a transaction of this nature came tumbling down. All I could think of was:
  • Its still bad economic times, how well can this company be doing? Aren't they trying to just raise cash because the company is in a tight financial corner?;
  • Are the shares really worth what is asked from me? Would I be able to get the same dollar's worth or more, should I want to sell?;
  • These shares are definitely illiquid. When I decided to get more stocks, I wanted more liquid assets and a more diversified portfolio. Am I not going backwards by tying my money on a business that I hope will do well, without an easy way out?;
  • How much power/ influence will these shares give to me? I would love to be more hands on and involved in the decision making. The possible partner loves my ideas in general, but that doesn't mean that I will automatically have a huge say in what goes. My shares are a tiny percentage.;
  • Is the information on performance of the company that I will get not biased?;
  • Am I not moving backwards and dumping my beautiful plan of acquiring listed shares in and outside the country?
Why is it so difficult to take a decision. The thought of investing in the company is exciting and the risk so overwhelming. Its only two days before the implementation of my new "before this incidence" strategy and I think I should continue with it. I should probably take some time to think about this.

Would you consider buying shares in an unlisted company?
 

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