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B usiness Owner: Unlocking Illiquid Wealth.
The Challenge
You recently sold your business and consequently hold $45 million of the publicly traded acquirer’s stock. Although you are optimistic that the acquiring company’s stock will rise, you are concerned about the risks inherent in a high concentration of any one stock.
Our Solution
Hawthorn suggests that you diversify your portfolio by engaging in prepaid forward contracts through PNC Capital Markets. A prepaid forward contract puts cash in your hands today but allows you to retain the stock for several months, during which time you will continue to collect dividends. If the stock increases in value, you will not have to sell all the shares under contract; if the stock declines in value, you will not have to sell more than the shares under contract.
Customer Benefit
With the cash advance, you can begin to diversify your portfolio today while deferring tax on the capital gains until the contract matures. You also retain the upside on some of the shares while limiting the downside risk of a high concentration in a single stock. |
