Investing in Private Equity as a new hire

[Charlotte.:R]

Any investment gurus in here?

My wife is starting a new job in PE and has the opportunity to buy 'units' of the company. 18 months ago when the company started up 'units' were $1, now they are $1.70. If they sell, or she leaves, the 'units' payout.

Good or bad idea? Risks? This is all new to both of us.

 

[jimlloyd40]

Depends on the long term success of the company. I'm not a believer in buying single stocks or in this case units. If the company has an upward trajectory it's probably okay to purchase a small number of units. I would want to see a P&L statement to make sure the trend is upward.

 

[Acadia18]

Just take the money and buy #GME

 

[Charlotte.:R]

Just take the money and buy #GME

Its too late for that.

I’m trying to understand the risks:benefits as an employee.

I guess it’s like an ESOP.

Car forum is probably a bad place to ask for investment advice lol

 

[PRRGG1]

I'm with jimlloyd40 in that I'd want to see a balance sheet to appraise the firm's assets and an income statement to gauge profitability. I'd also want to better understand the liquidity of your shares. If they're traded only within the company, she's beholden to the company's appraisal of their worth and their willingness (or ability) to repurchase them. May not be a bad thing, but I'd suggest waiting to invest until she gets her feet on the ground and gets a notion of what goes on there.

 

[Charlotte.:R]

I'm with jimlloyd40 in that I'd want to see a balance sheet to appraise the firm's assets and an income statement to gauge profitability. I'd also want to better understand the liquidity of your shares. If they're traded only within the company, she's beholden to the company's appraisal of their worth and their willingness (or ability) to repurchase them. May not be a bad thing, but I'd suggest waiting to invest until she gets her feet on the ground and gets a notion of what goes on there.

Thanks, the P&L checks out. The units aren't particularity liquid--you can only cash them out at termination or if the company sells. Unfortunately, the window to acquire incremental units is only 90 days from hire.

To your point, it's the uncertainly of determining the companies appraisal, which is tied to net assets, and the their limited history that has me concerned.

 

[jimlloyd40]

Thanks, the P&L checks out. The units aren't particularity liquid--you can only cash them out at termination or if the company sells. Unfortunately, the window to acquire incremental units is only 90 days from hire.

To your point, it's the uncertainly of determining the companies appraisal, which is tied to net assets, and the their limited history that has me concerned.

Due to the lack of liquidity I would invest in mutual funds instead. That way the risk is minimized plus with the economy ready to open up again soon due to the vaccine there will be some great short term gains in mutual funds.

 

[Charlotte.:R]

Due to the lack of liquidity I would invest in mutual funds instead. That way the risk is minimized plus with the economy ready to open up again soon due to the vaccine there will be some great short term gains in mutual funds.

Thanks, we’re already in mutual funds. Sounds like lack of liquidity is the big concern, which I’m ok with in this case.

 

[brat_burner]

I say go for it if she likes the work and you believe it will be successful. Obviously, don't YOLO everything on it.

 

[odessa.filez]

there are too many concerns to list, but I'll throw a few out there.

1. There are gazillions of investment opportunities out there, including well diversified mutual funds. Why this? Just because they hired you?

2. What objective, transparent measurement determines the exit price should you decide to leave?

3. What prevents the company from diluting unit value by issuing more units?

4. Enron

5. What other investments do you have? Company goes under your units are worthless and you have no job.

OP you're right about asking the wrong audience. You need a financial advisor who can evaluate the company's documents, the shareholder agreements and give you good context on investment alternatives.

 

[brat_burner]

It would be helpful if more information was provided. I've contemplated starting an investment or general money thread. I'm not saying I'm the person to do so, but I feel it could benefit members. It's a pretty diverse group here, seems to be a lot to share/learn.

 

[Dog Dad Wagon]

What’s PE? I work for a company with an ESOP and if I had the ability to buy more shares than I’m already awarded per my compensation statement, I would do everything in my power to max out my buy-in. My company’s share value has trended 20% year over year for over 10 years though, so the startup aspect of your wife’s company does play a critical role here

 

[Charlotte.:R]

What’s PE? I work for a company with an ESOP and if I had the ability to buy more shares than I’m already awarded per my compensation statement, I would do everything in my power to max out my buy-in. My company’s share value has trended 20% year over year for over 10 years though, so the startup aspect of your wife’s company does play a critical role here

Private Equity