Thursday, February 21st, 2019...16:56

RIP Sweet, Tender CafePress

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Somewhere along my circuitous route through paid employment I spent ~21 months at a company called CafePress. I met some great people, learned a lot and as part of the offer letter, received Incentive Stock Options (ISO) in the not-yet-public company. My previous encounter with stock options did not result in anything material i.e. my offer letter included them but shortly before the 1 year cliff the company shrunk to 4 people (including me) and I left a few months later without exercising anything when the company ceased to exist. While access to information about the mechanics of start up equity has increased significantly over the last 15 years, it rarely hurts to have more information and real-world examples.

Deciding to leave CafePress started a 90 day timer during which I either needed to buy my ISOs and pay taxes on the capital gains between the strike price and the current valuation, or forget about them (it was 2006 and startups had not yet gotten around to converting ISOs to non-qualified options [NSO] with longer exercise windows, oh well).  I had 8,750 shares at a strike price of $0.25/share. The then current valuation was $0.75/share, so that came out to $2,187.50 to buy them and then a taxable gain of $4,375 which set me back another ~$1,300. So I plunked down ~$3,500 figuring what the heck; there had been talk about going public in the next few years and I believed in the company (I just didn’t want to commute to San Mateo anymore and wanted to work on much larger problems/systems/datasets etc.) If the stock made it to $10/share that’d be the biggest lump sum of money I would have encountered to date by an order of magnitude. If it made it to $20/share I could self-fund a multi-year sabbatical etc.

A few years later, a company called SharesPost opened up a private equity marketplace and after a while CafePress appeared in their listings. If I had been willing to part with at least 5,000 shares I could fetch ~$5/share. I didn’t fully understand the process or fee structure and given the economy had recently collapsed, figured there was still significant upside in the future presuming things eventually recovered.

CafePress ended up going public nearly 6 years later, but before doing so, executed a reverse stock split i.e. I now owned 4,375 shares with a cost basis of $1.50. On 2012-03-29 PRSS opened at $19/share, rose to a high of $22 and then closed at $19.03.

CafePress ringing the opening bell at the NASDAQ.

Some friendly faces enjoying the moment.

Not too bad, had I been able to cash out right then, I could have purchased a Tesla Model S outright. Sadly, the stock never again traded above $20 and by the time the 180-day lockup period I was subject to ended on 2012-09-24 , it had experienced a steady drop to $9.32/share. I figured even if it were to go up again in the future, it would be prudent to offload a chunk.

Unfortunately I hadn’t paid attention to the state of my shares. I left them with a company called ComputerShare during the lockup period and it turned out I could not sell shares through ComputerShare as they were just a holding/transfer company. The shares needed to be transferred to a brokerage and none of the ones I had accounts with seemed to be able to accept the transfer electronically/immediately. So by the time I had figured out what needed to happen, assembled and sent all the forms, a few days had passed by. Then there was a weekend, processing time etc. In hindsight I should have sent the forms overnight express or paid to use a fax machine, as by the time I could finally access the shares and sell them on 2012-10-11 the share price had dropped below $7 i.e. a paper loss of ~$12,000 (after the taxes I would have owed on the gains) due to stupidity.  On that date, I liquidated 1,375 shares at an average price of $6.635/share 

In order to calm down, I kept telling myself this was all icing on the cake since the number of startups that actually have a liquidity event is small. The next day I sold another 500 shares at $6.02/share. The stock continued to decline but then bounced back a bit in early November. I sold 500 more shares at $6.15 on 2012-11-07, 1,000 shares at $5.01 on 2012-11-08 and 500 at $5.50 on 2012-11-14. At that point I only had 500 shares left and had sold 3,875 shares at an average price of $5.927/share. For 2 years after that the stock bounced around between $5 and $7/share and then in Q4 of 2014, it cratered to ~$2/share.

I still knew a few people who worked there and felt horrible for them, because even if they were following their passion, growing their technical, social, emotional skills etc. having one’s company’s stock, and therefore part of one’s total compensation, lose 90% from the IPO is hard to digest.

A ray of light emerged during the first half of 2015 as the stock went up 150% to just over $5/share in early June, but I did not act. From there it declined again over the next year and a half to under $3. On 2017-01-31 it was above $3 and I decided to donate 300 shares ($1,011) so as to avoid paying any long-term capital gains taxes; even at $3/share it was still a 100% gain over my strike price.

Sadly, the stock price returned to its downward trend, eventually going below $1.20/share in early 2018. At this point I had decided I was going to just hold on to them “forever”. However in late 2018 I received a bunch of legal documents stating that Snapfish was planning to acquire CafePress via a tender offer for $1.47/share. There was some jargon in it that I think stated I could lead a shareholder revolt etc. to try and block this, but once Snapfish had a majority stake they would not be anything I could do. So I did nothing and as I work on my taxes for this year, I’ll be claiming a $6 long-term capital loss for PRSS.

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