Legal Question in Securities Law in California

Re: Face Value of Stock Changing in Private Company

Your question raises two main issues (and probably several sub-issues under each main topic). The first issue is whether the securities laws are violated in any way by the issuance or the commitments to issue the underlying securities. The second issue is whether the contract between the issuer and the contractors and/or vestees was violated by the change in the exercise price.

Based on the skimpy facts given, I can't venture even a guess as to the answers. I would need to see at least the one contract you mention, and probably some earlier contracts exist between the issuer and the vestees. I would also need to research the registration exemption (if any) the issuer was using or planning to rely upon with respect to the securities in question.

It is often said that there are three kinds of securities issuances: registered, exempt from registration, and illegal. I would need to determine where this proposed and/or actual issuance of securities fell, both as to the rights and as to the future stock.

If you wish to pursue the matter further, please feel free to contact me directly with particulars, and we could engage in some no-cost preliminary exchanges of views.