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Technology Stocks : Cisco Systems, Inc. (CSCO)
CSCO 72.99-2.0%12:12 PM EST
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To: JakeStraw who wrote (77311)2/2/2017 9:47:46 AM
From: Puru rama   of 77397
 
Shares of Cisco (CSCO) were higher in late morning trading on Wednesday after acquiring AppDynamics for $3.7 billion as it continues to move toward becoming a software company. AppDynamics was scheduled for an initial public offering valuation of less than $2 billion.

Cramer expected Cisco to boost its dividend more, but this deal is actually better because it creates a higher multiple, he claimed. This is what needed to happen since their core business was slowing "to the point that people like other companies in the sector."

what factors startup shareholders should weigh when they are fortunate enough to have exit options:


IPO shares provide highly focused upside and risk. If investors believe that the company will keep growing rapidly and is on a predictable path to profitability, the IPO shares are a great bet. But often the company's CEO has no experience running a public company and the industry is highly competitive, therefore the IPO could force investors -- who are typically barred from selling their shares for at least six months -- to suffer painful losses after an initial IPO pop.

Acquirer cash. This option clearly locks in investment gains -- if any -- but also could present a tax problem assuming that the investor is required to pay tax upon receipt of the cash. I am guessing that tax advisors might help with this problem.

Acquirer stock. This option clearly lets an investor defer paying taxes on any gains until she sells the shares in the acquirer. And it may make sense to hold onto the acquirer's stock if the investor believes that its CEO can sustain better-than-expected growth.
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