is it good when another company invests in your company?

nageov3t

Lifer
Feb 18, 2004
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I can't quite figure out if it's good or bad when Company A needs to turn to Company B for a cash infusion and Company B acquiesces by investing in Company A.

and I can't wrap my head around what it could mean for my stock options of Company A were to ever go public.

my only real corporate experience before this job was a company that, for my entire time working there except a few months after 9/11 when they were scamming the government, was perpetually on the cusp of insolvency.
 

KeithTalent

Elite Member | Administrator | No Lifer
Administrator
Nov 30, 2005
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It depends. This happened at our company a few years back and overall it was a good thing because it allowed us to do some things we wouldn't have been able to otherwise. However, there were other changes such as having to adopt certain services from Company B, which were not any better, and quite possibly worse, than the services we were already using, plus they ended up with a decent sized interest in the company from the stock we issued them, so they have a pretty big say in the major company decisions (less so now because we bought some of the stock back).

That's my experience with this.

KT
 

Beattie

Golden Member
Sep 6, 2001
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It's generally not a good sign for an established company to be borrowing money. If it's new, a lot of companies look for investors to get off the ground but if the company is looking outside to fix cash flow issues instead of fixing what's causing them to not make money in the first place, it's time to start looking for a job.

Could also be that the company just needs the money to fix the problem that they have identified, but I would find that rather unlikely.
 

nageov3t

Lifer
Feb 18, 2004
42,808
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It's generally not a good sign for an established company to be borrowing money.

that was kind of my original thought, but everyone in the office seems pretty excited over the news.
 

Mo0o

Lifer
Jul 31, 2001
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Originally posted by: loki8481
It's generally not a good sign for an established company to be borrowing money.

that was kind of my original thought, but everyone in the office seems pretty excited over the news.

probably because w/o the cash infusion it would have meant a lot of layoffs
 

JS80

Lifer
Oct 24, 2005
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Originally posted by: loki8481
I can't quite figure out if it's good or bad when Company A needs to turn to Company B for a cash infusion and Company B acquiesces by investing in Company A.

and I can't wrap my head around what it could mean for my stock options of Company A were to ever go public.

my only real corporate experience before this job was a company that, for my entire time working there except a few months after 9/11 when they were scamming the government, was perpetually on the cusp of insolvency.

This scenario gives an implied valuation of the company. If it's a growth company selling equity to a VC/PE shop it's a very good thing. If it's a major bank with dwindling capital getting funding from a middle east sovereign fund, it's not so good.
 

slsmnaz

Diamond Member
Mar 13, 2005
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The company I work for actually did this quite a few years ago when we needed money to expand. The investing company was from the UK and pretty much handed my comp money and was almost completely hands-off. It has been a great thing for both and even opened opportunities for some US folks to work 1-2 stints in the UK. Went from a smaller player to #1 in the industry in a short time period.
 

Savij

Diamond Member
Nov 12, 2001
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You get an idea of about how much your options are worth, but your options are now worth less in the case of any future dividend payout since the investing company has preferred stock or something like that. They're in line before your stocks for cash handouts.
 

nageov3t

Lifer
Feb 18, 2004
42,808
83
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Originally posted by: JS80
Originally posted by: loki8481
I can't quite figure out if it's good or bad when Company A needs to turn to Company B for a cash infusion and Company B acquiesces by investing in Company A.

and I can't wrap my head around what it could mean for my stock options of Company A were to ever go public.

my only real corporate experience before this job was a company that, for my entire time working there except a few months after 9/11 when they were scamming the government, was perpetually on the cusp of insolvency.

This scenario gives an implied valuation of the company. If it's a growth company selling equity to a VC/PE shop it's a very good thing. If it's a major bank with dwindling capital getting funding from a middle east sovereign fund, it's not so good.

for what it's worth, we're an IT company that's about 10 years old with ~200 employees.
 

AccruedExpenditure

Diamond Member
May 12, 2001
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If your company is privately held it probably jut means the owners/initial investors are cashing out some of their shares. Depending on your company's situation it could be good or bad
-AE