Stock Purchase Agreements – Everything You Need to Know About Stock Purchase Agreements
It is probably quite easy to figure out what stock purchase agreements are. These are contracts that transfer the sale of the stock from one party to another. If you invest in any type of stock, you will enter into stock purchase agreements with someone – probably even multiple people at one time. You are not limited to making these contracts for publicly held companies. You can also have them for privately held companies as well. So, that means they are not just for stocks traded on the exchange market.
Stock purchase agreements are contracts that detail not only the name of the stock and the date of the sale, but also the cost per share and how many shares were bought. This is an easy way to see how much your initial investment was in a company and to know when you begin seeing a return on your investment. There are also other things listed on the stock purchase agreement that dictates how the stocks can be used. Those who seek to buy stocks from a publicly held company are not restricted to doing so in a public market. Public companies can have private stock purchasers. It is just best if all stock purchases for a public company are done publicly to keep everything out in the open.
Something to look out for with private companies that you do not have to worry about with public ones is that the stock has no standard for being valued. The private company can slap any price on the share of stock and you would be none the wiser because there are no standards that private companies have to meet. So, you should definitely be alert and beware when entering into stock purchase agreements with a company that is privately held because you do not want to lose money.
As with any type of investment, entering into stock purchase agreements can be risky. You need to do your research on all companies that you plan to buy stock from, no matter if they are publicly held or privately held. The reason is that the stock be made to seem like it is worth more than it really is and you would end up losing, not just your initial investment, but also any hope of seeing a profit in the event that the company goes under. That is not something that any investor wants to see happen.