Ask HN: Can shares be canceled without notice? | Hacker News Reader

Ask HN: Can shares be canceled without notice?

2 pointsmsis3 comments

I had some shares in a startup that I left a while ago. I never had access to the cap table. When I checked recently, I saw a note in Carta: "XXX shares are canceled and do not return to the equity plan." and the reason is "Recapitalization". Can one lose all their shares in such an event even if the company still exists?

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Yes, the key word is "Recapitalization." The company was in trouble so they most likely reissued new stock when they got more money to continue operations. When companies get into trouble it's unlikely any of the original stockholders will ever get any money. Depending on the situation if notice is required, not always required, it can be as simple as a notice in the newspaper.

It's unlikely they did anything illegal simply because it's relatively straitforth to follow the law and cancel all previous stock and reissue new.

So all common stock gets canceled? Including finding team? What prevents founders/board of doing this many times over to prevent dilution?

Who knows what happened but it's for sure that the company was in trouble and was unable to continue without a cash infusion. Stuff like this has to be approved by a court to make sure there are no shenanigans happening. Company officers have to follow the law. They can't just decide that they will cancel stock and reissue new without a valid reason.

BTW, even if they had looked for you and told you about the reissue, it's unlikely you would have done anything. Since you would have needed to put some money in the company to buy the new stock. Sometimes it's possible to exchange old stock for new stock but the company would need some assets. If you got nothing then it means there were no assets left for the common stockholders.

I agree with what others say, stock issued as part of your compensation should be valued at 0 until you can cash out.

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