I remember hearing about Steve Jobs being forced out of Apple, and the McDonalds brothers being forced out of McDonald’s. In both instances, the method of forcing was a buyout, but I don’t understand how this can be considered “forcing” if they consented to sell their shares. I feel that I am misunderstanding what happened, and just want to know how a shareholder can be forced to sell their stake in a company.
In: Economics
Most countries laws about stocks will have a provision for a forced buyout. In Norway, a majority shareholder, holding more than 90% of the stock in the company, can force a buyout. Furthermore, the same laws will typically have a provision for forced buyouts in cases of serious and permanent conflicts of interest between majority and minority owners. IIRC, the latter was the case when Steve Jobs was ousted from Apple.
A majority shareholder can force a minority shareholder to sell their shares back to the company whether they consent to it or not
Steve Jobs was forced out as the CEO not out as a shareholder. Just because you own stock in a company does not mean you can demand to be CEO, I can purchase an Apple stock but I can’t demand to be CEO.
It is the board or director that chooses who is CEO and the board is selected by the share holders. It looks like Steve Jobs owned around 11% of the share of Apple at the time so he controlled 11% of the votes. If the represtetative of enough other owners did not want to have Jobs a CEO they can remove him from the post.
Jobs did sell most Apple stocks after he was ousted as CEO but that whas his choice.
Founders often do not own all of the company. If you need investors to build up the company they likely require a share of the company. When you get listed on the stock market there tend to be a lot of shares sold to anyone that what to purchase them.
If you grow a company without outside investors you can own all of it and then no one can force you out as CEO. I think it is enough to control more than 50% of all the votes to be impossible to remove.
Different countries have different mechanisms, but in general a publicly traded company can legally force a minor shareholder to sell their shares at market price. This is usually reffered to as a “squeeze out”.
I don’t specifically know how it happened with Apple and McD, but in this scenario Jobs wouldn’t have to consent to the sale, but he would have needed to voluntarily sell some stock before this, in order to even get to the point where he can be squeezed out (usually you need to own 10% or less of the company for this to become an option)
If the company is about to fail, eg goes bankrupt, it might require a large infusion of cash to remain solvent and continue operating. The term “force out” does not imply use of force or even legal compulsion. It is simply that other shareholders including major ones might be proposed a deal “I will invest or lend money to the company. In return you to sell your shares to me”. Other terms might be “you will quit as CEO” etc etc. Although they can refuse, doing so likely dooms the company to close.
If enough shareholders/directors vote to accept the deal it pressures the other shareholders/directors to come along or be forced to resign as directors or face lawsuits for not fulfilling their fiduciary duty. There is a lot of deal making and politics involved.
The end result is some parties accept a deal that they may not agree with (or even be ‘fair’) just so that a worse consequence doesn’t occur.
You’re mistaken about both Steve Jobs/Apple and about the McDonald’s brothers. Neither was forced to sell their shares. The McDonalds brothers sold their shares to Kroc voluntarily (albiet he put them into a corner by purchasing the land that they’re restaurants were located on, becoming their landlord and threatening to shut them down). Steve Jobs was fired as CEO by the Apple Board. He (in anger) sold all of his shared except 1 – no forced sale.
In general, there is no way for a shareholder to be forced to sell their shares. However, when you become a shareholder in a company, you sign up to a shareholder agreement. Sometimes those agreements can have clauses in them (i.e. drag along or buy-sell clauses) which give majority shareholders the ability to force minority shareholders to sell their shares to them. But without such an ability contained within your shareholder agreement – you can’t be forced to sell.
You can’t force sell shares but you can dilute their shares face book is an example of this.
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