Discuss four important risk and tax-related considerations that are relevant to Omo’s portfolio.

With most of Omo’s personal net worth tied up in his software company, he is asset rich but cash poor. Jing suggests three possible strategies that Omo could use to generate liquidity from the software company:

Strategy 1: Personal loan secured by Omo’s company’s shares without a put arrangement Strategy 2: Leveraged recapitalization Strategy 3: Leveraged ESOP (employee stock ownership plan)

Omo tells Jing that his goals are to avoid an immediate taxable event for him or his company and to maintain his ownership and control of his company.

Tesando Omo is a highly successful entrepreneur. The software company that he started five years ago is now worth \($200\) million. It is a private company, and he is the controlling owner, with a 60% equity share. His only other investment is a position in the publicly traded shares of his previous employer, which he acquired by exercising stock options six years ago. This publicly traded share position has substantially increased in value and is now worth \($36\) million.

Omo recently sought financial advice from Umae Jing. After discussing Omo’s personal situation and financial goals, Jing expresses concern about Omo’s current portfolio and points out several important risk and tax-related considerations that are relevant to Omo’s portfolio.