Tax & regulatory take‑aways for shareholders in the EverQuote buy‑back
Tax treatment of the cash‑for‑stock transaction – The $23.33 per‑share cash payment is treated as a capital‑gain event. Because the price is only a modest discount to the market, most shareholders will be selling at a price that is close to the current fair‑value of the stock. The proceeds are therefore taxed as a short‑term capital gain (if the shares have been held for ≤ 12 months) or a long‑term capital gain (if held > 12 months). The discount does not create a “bargain‑sale” exception, so the full cash amount is included in taxable income. For non‑U.S. investors, the 30 % withholding on U.S.‑source dividends does not apply to a buy‑back, but the transaction may still be subject to the investor’s home‑jurisdiction tax rules and any applicable tax‑treaty relief.
Section 83(b) and § 1202 considerations – EverQuote’s Class A shares are ordinary common stock, not qualified small‑business stock, so the § 1202 “100 % capital‑gain exclusion” does not apply. There is no § 83(b) election to make, but shareholders should retain the date‑of‑sale confirmation and the cost‑basis records to substantiate the holding period for the gain calculation.
Regulatory compliance – The repurchase was executed under Rule 10b‑18 (the “safe‑harbor” for open‑market buy‑backs). The company adhered to the required volume‑weighted average price (VWAP) discount (3.96 % below the 10‑day VWAP) and the maximum daily purchase limit (≤ 25 % of the average daily volume). For shareholders, this means the transaction is fully compliant and does not expose them to additional filing obligations. However, any insider (e.g., officers, directors, or affiliates) must still file Form 4 (or Form 144 for a “Rule 144” sale) to disclose the disposition, and must be mindful of Rule 144’s holding‑period and volume‑restriction rules if they are considered “restricted securities”.
Actionable insight:
- Review your cost basis and holding period now to determine whether the proceeds will be taxed at the higher short‑term rate or the lower long‑term rate.
- Non‑U.S. investors should consult a cross‑border tax adviser to claim any treaty‑based withholding reductions.
- Because the buy‑back is priced at a modest discount, the price impact on the market is limited; the primary driver for participation is likely portfolio rebalancing rather than a “discount‑buy” opportunity. If you are a long‑term holder, consider selling only a portion to lock in the cash while preserving upside, especially given the modest premium and the company’s $50 M buy‑back program that could support the share price in the near term.