Why should I invest in private stock with no dividends?

With Title III of the Jobs act, we are seeing companies raising capital from crowdfunding. In many of these cases, they are selling private stock, and will not be paying dividends.

What is my incentive for investing in such a company? Is the idea that at some time in the future, I will be able to find another private investor who will be willing to buy the shares from me at a higher price than I paid for them? How does this stock become monetized?

Investing, Stocks
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July 2017
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In my opinion, this is a very risky endevour without a LOT of due diligence on each private company.  You need to ask what is their exit strategy for investors and if there are required to take certain actions and/or payments if certain benchmarks are hit. No guarantees, but what if things do work out how would you get paid. In other words, you are spot on and even if they make money, how can you be sure they will pay out anything.

That is the problem with privately held stock where you are a minority shareholder with no control.

Hope this helps and best of luck, Dan Stewart CFA®

July 2017
July 2017
July 2017
July 2017