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Buying shares of a private company

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1 Buying shares of a private company on Thu Nov 13, 2014 5:52 am


Arresto Menor
Hi everyone! I am planning to buy shares of a small private company. I would like to know what are the things that I should do? The company is a corporation which mainly deals with fit-out works.

Appreciate any comments and advice.

Thank you.

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2 Re: Buying shares of a private company on Mon Feb 16, 2015 9:05 am


Reclusion Perpetua
first. you need to identify yourself if you are an alien or not.

second. check with the sec if it is a registered corporation or not.

third. know the person whom you are dealing with. he might not be connected with the company.

fourth. check the financial statements if it is worth buying for.

fifth . ask people around regarding the operation of the company.

sixth. check the pros and cons of starting a new company or just buying a share with that company. remember that if you buy a minimal share or not a majority share, the management control rest not on you but on the person or block who hold such majority share. your investment goes down with any mismanagement or bad decision they will make

seventh. seek the advice of a financial consultant or lawyer

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3 Re: Buying shares of a private company on Tue Feb 17, 2015 8:52 pm


Reclusion Perpetua
When VALUING a company, then it's TRADITIONALY done like this:
1. "scap value" = the value of THINGS, which can be SOLD SEPARATE.
2. a) Business total RESULT* for the last 3 years.
b) OR if it's new or improved much during the last years, you can count 3 x last year RESULT.
c) OR IF it's a research company or such and finnished something big recently, then it can be ok to count 3 x EXTIMATED profit. But what YOU estimate it too, NOT just count what seller estimate it too. Many sellers/developers are to optimistic Smile

*Don't do as many do = mix up Revenue with Profit. Many people value high reveue high, although low or no profit !!! = WRONG Smile in many cases. High Revenue ISN'T worth anything, if it can't be transformed to profit...

p1 + p2 = company value. Then split with how big part you are offered.
Don't forget when OTHER have the control, they can "sneak away" profit to OTHER company than the one you have part of. So much in the "valuing" is who has the control, is he/they trustworthy and skilled.

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