Majority Owner of US Pubco wants Out

It’s been a few years since I last took the level 3 exam (failed twice). Nevertheless, one of the lessons I have mostly forgot about woukd be nice to remember now since I need to apply the lesson to a real life practical situation at work. I am looking for opinions and suggestions and ideas.


Corporate officer owns 80% of a US public co. Pubco has a $300 million market cap. so his shares are worth about $240 million.

He would like to divest most of his holding so his ownership is at least less than 50% and he has the blessing of the rest of management.


What is the best way to do this?


  • We do not want to take the company private.
  • We want to get the insider a decent price but he will take a discount.
  • Selling to the market will crush the stock price given the small public float.
  • The company can handle some debt, but not more than $50 million.
  • 6 month time frame to complete.

I am looking for creative ways to sell this guys stake as confidentially as possible while avoiding negative marketing impacts as much as possible. Any ideas appreciated.

First of all, no part of the CFA curriculum contains interesting or useful real life examples like this. More importantly though…

You could do an investment bank sponsored PIPE where you would choose the purchasers (at a discount). If it is a good investment at this price there will be buyers, however it is zero sum so probably to attract good long-term holders, it will need to be at a somewhat unfavorable price to the insider. If it is a growth company, you can probably tell a (hopefully legitimate) story to the investment community that would increase interest and likely result in a smaller discount.

This could certainly be done within six months. Most likely an investment bank(s) would pick up (favorable) coverage of the stock to support the deal. Remember that investment bankers are incentivized to be overly optimistic, so make sure you run a good process and vet several banks (preferrably a reputable middle market bank).

In terms of preferred shareholder base, that is up to you based on the company’s goals. My advice is to look for a long-term, stable base such as a family office – clearly it will need to be multiple offices since it is very difficult for someone to purchase >=30% of a public company, nor would the founder likely want that much power in one groups hands. You also don’t want to sell chunks of the business to PIPE hedge funds that will flip the deal within 6-12 months because that will likely depress the price of the stock.

Lastly, you probably already thought of this, but if the owner has <50% of the stock at some point, you may consider putting provisions in place to prevent a hostile takeover attempt where he could be outvoted based on the new, future ownership structure. Although 49% is a very high hurdle, it would technically be possible unless you have something in place to prevent it.

If an investment bank won’t take it, this is a perfect job for James Keene.