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In this episode, David introduces a recent M&A deal that was delayed due to issues with stock certificates and ownership records. He sets up the episode topic on the importance of stock certificates in business sales.

Overview of Stock Certificates 

David defines stock certificates, explains their purpose, and outlines the main types (common, preferred, restricted, founders, cancelled). He emphasizes their critical role in documenting ownership.

Types of Stock Certificates in Detail 

A detailed breakdown of each stock certificate type, including who typically receives them, their purpose, and pros/cons:

• - Common stock
• - Preferred stock 
• - Restricted stock
• - Founder shares
• - Convertible/redeemable shares

Reconstructing Ownership History 

David explains how to piece together a company's equity history when records are incomplete, including examining tax filings, cap tables, emails, and other documents.

Due Diligence and Post-Closing Issues 

Discussion of potential problems that can arise during due diligence or after a deal closes if stock certificate records are not properly maintained.

Conclusion 

David summarizes key takeaways and encourages listeners to pay close attention to stock certificate issues in M&A deals.

Questions/Answers

Q: What is a stock certificate?

A: A stock certificate is a physical or electronic document that represents ownership of shares in a company. It usually includes the shareholder's name, number of shares, class of stock, issue date, and signatures of corporate officers. 

Q: What are the main types of stock certificates?

A: The main types are common stock, preferred stock, restricted stock, founder shares, and cancelled certificates. 

Q: Why issue restricted stock?

A: Restricted stock is issued to incentivize long-term commitment and align the interests of key employees or executives with the business. It often comes with a vesting schedule. 

Q: What should you do if there is no stock ledger?

A: You need to become a detective and reconstruct one by examining tax filings, cap tables, emails, board minutes, founder documents, and banking/legal correspondence. 

Q: What kinds of issues can arise during due diligence related to stock certificates?

A: Issues can include undocumented liquidation preferences, missing board authorizations for share issuances, and unexpected vesting accelerations upon sale. These can lead to deal delays or restructuring demands.