Uber Tender Offer: Do I qualify as an accredited investor?

by | Dec 2, 2017 | Financial Independence, Liquidity Events, Stock Options, Tech Industry, Tender Offers

Uber Tender Offer: Do I qualify as an accredited investor?

by | Dec 2, 2017 | Financial Independence, Liquidity Events, Stock Options, Tech Industry, Tender Offers

UBER Tender Offer Accredited Investor Requirement

The past few weeks in the world of tech companies have been like Mitch-a-Palooza from the movie Old School: a wild and crazy party thanks to the Uber tender offer.

We’ve been working ‘round the clock to help current clients and new contacts with this tender offer — and want to help you, too, by providing you some of the basic info you need to make smart financial decisions if you’re involved in this flurry of activity.

It’s cool… Just bring your green hat.

What Do We Know About the Uber Tender Offer?

Here is what we know so far about the tender offer from SoftBank to purchase shares of Uber from current and former employees.

First and foremost, the deal is contingent upon Softbank securing at least a 14% stake in Uber. Past and current employees own at most a few percentage points, so the deal will rise or fall based on what the large shareholders (founders and VC funds) choose to do.

Techcrunch is reporting that Benchmark and Menlo intend to sell, according to Softbank.

Seeking Alpha details how SoftBank is both looking for a discount through share purchase and maintaining past valuation with a direct, cash investment.

Tencent and others may participate with Softbank in that tender offer. Tencent has been busy lately in the ride-sharing space, most recently with their dealings in India and Indonesia with Ola and Go-Jek.

Their reach in ride-sharing continues to inch closer to that of Softbank, which makes this all the more integral to keep on your radar in the coming months.

The price per share being offered is $32.96, which is well below the $48.77 per share that Uber was valued at in its Series G round last year. Shareholders have until December 28th to decide.

After that, SoftBank could choose to raise the share price if they can’t find enough sellers.

That might be something to pay attention to, as well, since Nasdaq Private Market (NPM) requires potential sellers to verify that they’re an accredited investor before making trades.

Understanding the Accredited Investor Requirement

Accredited investors are defined by the SEC as individuals with net worths of $1,000,000 or more. This can’t include the value of your primary residence.

If you don’t meet that requirement, there’s another that could qualify you: you must have reported at least $200,000 in income for the past two years. If you’re married, you need to have at least $300,000 of combined income.

There’s also an expectation that you’ll make the same amount this year.

But why is this requirement in place?

Long story short: we don’t know.

All of our experience with an accredited investor requirement has been with clients buying some form of private equity. This is the first time we have seen a deal require accredited status for someone to sell an investment.

(Techcrunch also reported on how unusual it is to see an accreditation requirement for a sell.)

We did some research and compiled some of the most helpful links and tidbits below to bring you up to speed on this accredited investor rule for the Uber tender deal.

Everything You Need to Know about the Accredited Investor Rules

The accredited investor rules were created by the Security and Exchange Commission (SEC) to prevent “unsophisticated” investors from purchasing “sophisticated” investments. The intention was to prevent unsuspecting consumers from being ripped off in the markets.

The rules are based on the assumption that people who have money or earn lots of money know more about investing.

Here are some helpful links to give you some background and context regarding the Accredited Investor rules:

  • SEC Easing of ‘Accredited Investor’ Restrictions: The Benefits – The SEC under the Trump administration has signaled a desire to ease the accredited investor requirements. A bill passed the House to expand accreditation to include investments in an area of expertise or experience. This would be another way to become accredited separate from the net worth or income requirement. While the bill passed the House, the Senate has yet to take action.

In all these sources, the focus is on buying an investment. Rule 506(c) of Regulation D allows firms or companies that solicit investors and advertise an investment “safe harbor” by taking an investor at their word that the investor is accredited.

The rule protects the seller of the investment. So again, all of these rules relate to you buying an investment from a company.

Softbank, Uber, and Nasdaq Private Market seem to be applying these rules in reverse: they are applying them to you if you want to sell your shares of Uber.

This has nothing to do with the Internal Revenue Service (IRS). There is no reporting requirement by the seller of the investment (you) or the purchaser of the investment (Softbank) to prove accredited status to the government.

Like we said: no one really knows why the accredited investor rule is in place in this case.

We can’t get the rule out of the way, but we can understand what to do about it in this situation if you qualify as an accredited investor under the net worth OR income rule for qualifying, and want to sell in this tender offer.

What You Should Do Right Now

You have until December 28th to choose to sell or hold your Uber stock options and shares. You need to get organized and call your tax and financial advisor. Now.

Don’t wait.

Doing nothing is choosing to hold your shares. Choosing to sell will create a large tax bill. Regardless of what you choose, you need to get ready for the implications now.

A well-executed plan now can create a lifetime of wealth. You can get started by reading our suggested steps on how to handle a tender offer, which include:

Keeping an eye on the news. This is the only time we suggest this! In this situation, keeping an eye on the headlines can alert you to anything breaking as we get into the final stretch before you need to make your decision on the 28th.

Call your financial planner. We can’t stress this enough. Don’t wait until the deal is finalized to realize you should have done something differently during this last week of the event.

Know the details. If you may participate in this tender offer, you need to know the number of options you have, what type of options you have, how many shares you own, and the exercise price.

Think about taxes. Events like tender offers can trigger massive tax consequences. Make sure you understand the tax ramifications of your actions.

And yes, all this applies to you if you’re a past employee, too. You might be applicable to participate, so double check before it’s too late and you miss your chance!

You can also check out our full post that details what tender offers are, why we’ve been watching the Uber deal, and what you need to do after you act on your own offer.

But then, you need to do more than read.

Act and reach out to an advisor who can help you plan before we reach the December 28th deadline.

Since passing the Certified Financial Planner (CFP) exam in November 2009, Landon has dedicated himself to the needs of busy young professionals. Before joining KB Financial Advisors in 2012, Landon founded Cumberland Wealth Planners in 2010 to serve clients in Nashville, TN. Landon took over the On Your Way to Wealth program in 2014 to help KB Financial Advisors further expand their work with young tech professionals in San Francisco who have stock options.

When he’s not on a plane to San Francisco, Landon lives in Nashville, TN with his wife Melissa and their three children.


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