As the company continued to succeed, the stock price had to be revalued even though the stock was not publicly traded. This began to have tax consequences for the founders (in particular emptying Dan Drake's and my bank accounts because of a little Sin of Omission on the part of our Distinguished Legal and Accounting Advisors). Clearly, if the success continued, we needed to learn well and learn fast the rules under which we'd be playing in the stock arena.Dan Drake researched this area in depth and wrote this memo which was originally circulated in August of 1984 and was revised and updated twice in 1985 as the public offering loomed closer. Though dated in some particulars of the law and tax rules, it's still the clearest statement I've seen of the twisty and treacherous passages one must negotiate to survive creating a new business and hundreds of jobs and not be either reduced to poverty or going to jail. Most companies don't warn their employees about any of this; the investment bankers were amused that Autodesk ``took the risk'' in giving this advice to the people who had built the company to the point the bankers could take it public.
![[Footnote]](i/foot.gif)
To: All stockholders of Autodesk, Inc.
From: Dan Drake
Subject: Taxes and such
Date: August 26, 1984 / March 6, 1985 / May 8, 1985
``I have yet to see any problem, however complicated, which, when you looked at it the right way, did not become still more complicated.''Poul Anderson
[This is a re-issue of a piece we distributed last summer. Not much has been changed, except to correct a couple of errors; in particular don't look for realistic prices in the examples. One of the errors, by the way, was based on published information from a Big Eight accounting firm. Does that mean that even they don't understand the law? Impossible.]
Some people have asked me for a summary of the stuff that I've learned about the landmines that the IRS, SEC, et al. have strewn in front of us. This is it. You should, as the saying goes, check with your own legal and financial advisers before believing any of this.
Much of this discussion concerns what happens when you sell stock, but don't get too excited: at the moment it's nearly impossible to sell our stock without going to jail. Sometime, though, our stock or a successor stock will be registered with the SEC so that it can be traded like any other, and you'll have to know the rules. If you persist to the end of this thing, you'll find some of the really amusing rules that apply when the stock is public, including Rule 144 and The Amazing Sixteen (b).
Actually, it may not be too hard to sell stock if the buyer is a California resident who already owns our stock, or if no citizens or residents of the United States are involved. (If you have reason to do it, ask for the details). Even so, it would be troublesome to trade the stock actively, but you've already signed an investment letter asserting that you have no intention of doing so before the stock is registered.
Editor: John Walker