I'm not sure, but I think someone owes me money. Or an explanation

April 15, 2024 2:29 AM

In the 90s, I did work for what was then a very small tech startup. Literally, a guy in his living room. I was paid at the time for those services. In 2000, as the company began to grow, he gave me a physical stock certificate for 1% of the company. That company was never publicly traded but has recently been sold to a larger, public tech company for a substantial sum of cash. I've never had a discussion with him or anyone else about this stock (in part because I never imagined he'd sell or go public). We're not on good terms anymore. I'd like to talk to someone about if my certificate has value and don't know where to start.

The work that I did was a bit of IT and a bit of admin, with some background theory/science. I no longer work in that field at all so only just learned about this takeover that was announced in late 2022. The startup is a US company that was incorporated in the state where I currently live.

As far as I know, other people who received similar certificates at the time included his earliest full time employees whereas I was more of a gig worker with no contract. They are all now well known in their field and I am sure their part ownership of this startup would have been fully considered and appropriately remunerated prior to the purchase.

I have never heard from anyone in the company regarding this stock since. I did hear from them in the early 2000s on an IP matter regarding the logo, and was paid a lump sum and signed a contract relinquishing those rights, so I know there was concern about "loose ends" from the more cowboy early days.

The founder and I stayed friends for a time - he was even a witness at my wedding! - but fell out over something rather pointless a few years ago. I have no desire to contact him directly and am also afraid of being brushed off or otherwise delegitimized. If my 1% was real, it would be a life-changing amount of money. Even a small portion of it would be life-changing for me; suffice to say I did not go on to success and riches.

It never occurred to me to talk to him about the stock since he was adamant about not taking venture capital (and never did) and not having an IPO. When we still talked our conversations were always about social matters or science, not how the company was doing or his big picture plans. So I don't know where I stand. I'm a total naif when it comes to contracts and so forth... assume I know nothing about how any of this works. My knowledge of tech stocks consists of the Andrew Garfield scenes in The Social Network and um, that's not super encouraging is it?

Do I need a lawyer? If so, what kind of lawyer? Do I need a broker? Where do I even start with this?

posted by anonymous to Work & Money (12 answers total)

You want a securities lawyer. Contact your state bar or use Martindale for a directory.

If it were me, I'd find the press release from the acquisition that states the name of the law firm that represented the buyer, then contact that law firm. But I'd be doing that with some confidence in my own documentation and ability to evaluate their response. Since you don't have that confidence, it's probably better just to start with having a lawyer look at your documents and determine if it's worth pursuing.
posted by mullacc at 3:20 AM on April 15 [12 favorites]

Seconding what mullacc said. This is a legal matter, and you need someone with experience in securities and mergers and acquisitions.

If you can’t find the name of the law firm that worked on the transaction, you can reach out to the general counsel (in-house chief lawyer) of the buyer (this name will either be on the website or you will need to do some Linkedin sleuthing) — as the buyer is a public company, they will have someone in that role.

Also, as buyer is public you may be able to find information about the deal from the SEC. Public companies need to file an 8-K for material contracts (such as purchasing other companies). If the deal is big enough, the contract will be out there and your lawyer can use it to help assess your position.
posted by techrep at 4:17 AM on April 15 [3 favorites]

I was in a similar situation a few years ago (luckily, minus the falling out part--we had just drifted apart and not been in contact for years). As part of due diligence, the purchaser tracked down every single outstanding fraction of a share and in the process I was contacted about a very small fraction of a percent that I owned. I'm surprised that didn't happen in this case (and 1% can be a lot!). I'm wondering if the founder never recorded the transfer? Either way, this is definitely a lawyer moment. Good luck!
posted by papergirl at 4:33 AM on April 15 [8 favorites]

You don't mention whether you still have the paper certificate. Hopefully you do. But regardless, lawyer, as others have said.
posted by Winnie the Proust at 6:26 AM on April 15

It is odd that the buyer didn't contact you, especially at such a significant percentage, which also makes me wonder whether Startup Boss Guy kept appropriate records. You don't mention whether you kept your own records; I hope you did.

I also hope SBG stuck to the "no venture capital" position throughout, as the chief way that a properly documented startup ownership position could lose value is through dilution in later funding rounds. But there are other ways, so I caution you to manage your expectations.

Googling "securities lawyer" or (especially) "mergers and acquisitions lawyer" will probably get you too general results--the ones with the money to have the biggest search-engine presence are going to be the $1000/hr. ones. Depending on just how much money is involved, you might end up there, or adjacent to there, but what you need first is a humbler lawyer focusing on corporate securities law in your state, which is the law that will govern how shareholders in Startup were treated. Most securities and M&A lawyers, even if they are located elsewhere, primarily deal with the corporate law of Delaware, which is where most major corporations are incorporated. What you want, ideally, is someone local and well-versed in the quirks of your own state's laws, which may well be underdeveloped due to the predominance of Delaware (unless you live in Delaware, of course). If you google for that (or you could also try something like "duties to minority shareholders startup [state]"), you may find that some firm has put out a relatively recent (say, last ten years) guide or commentary or article on your state's corporate organizational law, and you could try contacting them. It's not the ideal way to find an attorney, but not the worst, either. If they tell you, "sorry, you've got the wrong attorney" and you don't otherwise see any red flags, ask for a referral. They will probably know someone.

It is true that the acquirer's 8-K for the relevant quarter (which will be the quarter the deal closed, which may not be the quarter the deal was announced) may have more information and may include a copy of some form of the acquisitions agreement. It sounds, however, like you may find it difficult to parse, so up to you whether you feel like digging into that or waiting for your lawyer to do that for you. You could find it by going to the acquirer's investor relations website (usually under something like SEC Filings), but I think they don't always include the exhibits, which is where the agreement would be. If so, and if you're feeling brave, you can search the acquirer's name on the SEC's EDGAR site, which will return a billion results. You're looking for the 8-Ks (one per quarter) from the time the agreement was announced until the time the deal actually closed.

Bonne chance!
posted by praemunire at 7:49 AM on April 15 [7 favorites]

I think it will be hard to identify a securities/mergers focused lawyer who is willing to take this on without a significant financial commitment from you (e.g., a retainer or a contingency fee agreement). I would try to find a more general business lawyer that is known to you or your contacts and who is somewhat local to you and has a rate you can afford. I would have that lawyer write a letter demanding information from the buyer company. After you get that information, you can assess whether this seems like it is worth pursuing. If it seems like there is a lot of money at stake, you could consider trying to find more of a securities/mergers person at that time - it will be easier to hire one of them if you have information suggesting that it is a bigger case.
posted by Mid at 11:11 AM on April 15 [1 favorite]

Nthing all of the lawyer advice, but rather than a straight securities or M&A lawyer, I think a good term to search is a "minority shareholder" lawyer. In nearly every jurisdiction there will be specific duties that majority shareholders have with respect to minority owners, and specific remedies when they breach those duties. Assuming you can demonstrate your 1% ownership (without any big dilution) and the sale price is a big enough pie to eat from, you could likely find a lawyer to work on a contingency basis.
posted by AgentRocket at 3:03 PM on April 15

Mod note: From the OP:

"I just would like to add, since people in the comments asked:

1) Yes, I have the paper form.

2) I'm having difficulty finding appropriate legal resources for my state, which is New Mexico. If anyone can point me in the right direction that would be amazing. I'm 99% certain the startup was incorporated here and it's always been physically headquartered here.

3) To the best of my knowledge there was never venture capital involved. The last time I was in contact with someone in that company's management was 2019, and it probably would have been mentioned as it would not be in keeping with Startup Boss Guy's, shall we say, iconoclastic reputation in his field.

And no one asked but it occurs to me to add:

4) I'm not hard to find IRL (publicly listed address, same email address since the beginning of time, all the usual social media accoutrements). If the buyers had known to look for me they would certainly have found me. I think it's most likely SBG did not tell anyone, did not write it down, or simply forgot."

posted by travelingthyme (staff) at 3:25 PM on April 15

I would look for any small-ish business and litigation law firm in your city in NM, ideally one that is referred to you by a friend or contact. The basic concepts here - i.e., writing a letter to ask for an accounting of what has happened to your minority equity interest - is pretty straightfoward. If it turns into a dispute, then you probably need more firepower, but it will be very hard to hire more firepower right now, when you don't really know what you have. Think of this as hiring someone to write you a credible letter, not necessarily someone who would litigate a case.
posted by Mid at 4:11 PM on April 15 [4 favorites]

I want to be very clear that this is not a recommendation or a referral (I know nothing about these guys), but this is an example of a firm that might fit your needs. You can use the buzzwords to find your own.
posted by praemunire at 6:33 PM on April 15 [1 favorite]

Oh, you can probably find out where the corporation was incorporated by doing a search on whatever website New Mexico has for public corporation information. If the name doesn't hit (assume ancient website and try variations), check DE's.
posted by praemunire at 6:36 PM on April 15

Op, memail me if you would like the name of a NM attorney who can either help you or refer you to someone who can. I have not worked with this attorney but got their name from someone in NM who I trust on this sort of thing.
posted by Winnie the Proust at 7:29 AM on April 16 [1 favorite]