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

6 points by renegadus 4 years ago | 13 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?

giantg2 4 years 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.

renegadus 4 years ago | |

Thank you for the suggestion.

codeduck 4 years ago |

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

renegadus 4 years ago | |

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

97-109-107 4 years 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)

drstewart 4 years 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.

babaganoosh89 4 years ago |

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

renegadus 4 years ago | |

Interesting, thank you.

airbreather 4 years ago |

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

cm2012 4 years 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.

altdataseller 4 years 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

renegadus 4 years ago | |

The company was recently valued at over $6 billion.

sumanthvepa 4 years ago |

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