Is 5% a reasonable cut for a middle-man when selling shares privately?

6 pointsrenegadus4y ago13 comments

I have fully-vested options in a private company which expire in Dec 2023. A company has reached out to me saying they have a buyer for the shares. The shares are worth > $300k.

I'd like to sell because they expire in Dec 2023 and I don't know if there will be a liquidity event before then, however they want to take a 5% cut.

Is this a normal cut for a middleman in this type of transaction? Is there a way I can connect with a buyer directly to avoid giving a % to a middleman like this?

13 comments

giantg24y ago

5% sounds ok. If they reached out to you. Then maybe you can negotiate it down some.

There are private equity markets. You might be able to talk to a broker at a company that handles private equity (JPM?) and explain what you want to do. I would think their cut would be lower than 5%, but I have no idea.

renegadusOP4y ago

Thank you for the suggestion.

codeduck4y ago

95% of > 300k is worth infinitely more than 100% of nothing.

renegadusOP4y ago

I agree, but I don't want to give up 5% for something I could potentially do myself.

97-109-1074y ago

Just to add another perspecitve here - you might find out that middleman that you can easily access might find 5% of the deal not worth their effort.

The logic here is that prospective providers you will find are already busy with larger deals, as they are easy to find by all other market players.

(This is under the assumption that you don't have relationships with such middleman and would need to look for them)

drstewart4y ago

> Is there a way I can connect with a buyer directly to avoid giving a % to a middleman like this?

Sure. Find the buyer yourself. If you can't or don't know how, then surely it's worth 5% to you. If you don't think it's worth it, then let the options expire.

babaganoosh894y ago

5% is common for private stock market place like forge global. Often they charge the buyer 5% too.

renegadusOP4y ago

Interesting, thank you.

airbreather4y ago

Sounds like 5% might be a total bargain in the context, what will you lose if you miss the date?

cm20124y ago

I had shares pre-ipo worth $300k, then we ipoed and our stock price tanked while in lockup. Ended up selling at 30kish. If I could have taken liquidity pre-ipo I would have.

altdataseller4y ago

It depends on the company, if it’s a Databricks or highly coveted unicorn, then 1% is more than enough. It ids a struggling startup or no-name, then 5% might be fair

renegadusOP4y ago

The company was recently valued at over $6 billion.

sumanthvepa4y ago

I would push for 2% of net sale value. But my experience is limited to India where costs are lower.

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Is 5% a reasonable cut for a middle-man when selling shares privately?

6 pointsrenegadus4y ago13 comments

I have fully-vested options in a private company which expire in Dec 2023. A company has reached out to me saying they have a buyer for the shares. The shares are worth > $300k.

I'd like to sell because they expire in Dec 2023 and I don't know if there will be a liquidity event before then, however they want to take a 5% cut.

Is this a normal cut for a middleman in this type of transaction? Is there a way I can connect with a buyer directly to avoid giving a % to a middleman like this?

13 comments

giantg24y ago

5% sounds ok. If they reached out to you. Then maybe you can negotiate it down some.

renegadusOP4y ago

Thank you for the suggestion.

codeduck4y ago

95% of > 300k is worth infinitely more than 100% of nothing.

renegadusOP4y ago

I agree, but I don't want to give up 5% for something I could potentially do myself.

97-109-1074y ago

Just to add another perspecitve here - you might find out that middleman that you can easily access might find 5% of the deal not worth their effort.

The logic here is that prospective providers you will find are already busy with larger deals, as they are easy to find by all other market players.

(This is under the assumption that you don't have relationships with such middleman and would need to look for them)

drstewart4y ago

> Is there a way I can connect with a buyer directly to avoid giving a % to a middleman like this?

Sure. Find the buyer yourself. If you can't or don't know how, then surely it's worth 5% to you. If you don't think it's worth it, then let the options expire.

babaganoosh894y ago

5% is common for private stock market place like forge global. Often they charge the buyer 5% too.

renegadusOP4y ago

Interesting, thank you.

airbreather4y ago

Sounds like 5% might be a total bargain in the context, what will you lose if you miss the date?

cm20124y ago

I had shares pre-ipo worth $300k, then we ipoed and our stock price tanked while in lockup. Ended up selling at 30kish. If I could have taken liquidity pre-ipo I would have.

altdataseller4y ago

It depends on the company, if it’s a Databricks or highly coveted unicorn, then 1% is more than enough. It ids a struggling startup or no-name, then 5% might be fair

renegadusOP4y ago

The company was recently valued at over $6 billion.

sumanthvepa4y ago

I would push for 2% of net sale value. But my experience is limited to India where costs are lower.

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