What is the valuation impact on present shareholders that do not sell stock?
Once the ESOP has acquired stock, and assuming a leveraged transaction has occurred, the post-transaction fair market value of the company may be less than the pre-transaction value, due to the debt that the company has undertaken to finance the ESOP’s purchase of stock. Shareholders who elect not to sell in the initial ESOP transaction must understand that in the early years of the ESOP debt repayment period, their stock value may decline.
