14 ms·

Secondary shops flooded with unicorn sellers

165 points by ap3 11y ago

mmanfrin 11y ago
Semi related question: One has to be an accredited (i.e. wealthy) investor to invest in startups, but this does not apply to employees exercising options. Does that mean that employees who do not meet the wealth requirements to be accredited are only ever able to sell ownership, and only to accredited investors?
- ska 11y ago
  This depends on jurisdiction of course, but employees may also be able to invest, even if they don't meet the requirements. It's not easy for an employee to get access to a secondary market anyway, but yes they should also be enforcing the transaction rules.
- dhj 11y ago
  If the company is private then employees exercising options generally (always?) have clauses that restrict them from selling that stock whether they are accredited investors or not. Not a lawyer, but I think there may be two reasons: 1) prevent covert takeover from the original founders 2) prevent a general market for private companies (before IPO). IPO involves a lot of regulatory overhead to confirm full disclosure. I think the restriction is to maintain control, but it may be a legal requirement before public market. In other words you can't sell except as part of a board approved sale of the company or a public offering. I think opportunities to buy are based on new issuance of stock (for accredited investors) not based on trades of existing stock.
  - shimon 11y ago
    I too assumed this limitation was widespread. But if unicorns are high-valued private companies, and there is a secondary market for their stock, then surely some holders are not restricted this way. Anyone know why / what triggers that? When is it typical for stock granted to employees to actually be resellable?
    - mavelikara 11y ago
      Depends on the terms under which the employee is issued stock. From a 2014 article[1]: Two months ago, an early Uber employee thought that he had found a buyer for his vested stock, at $200 per share. But when his agent tried to seal the deal, Uber refused to sign off on the transfer. Instead, it offered to buy back the shares for around $135 a piece, which is within the same price range that Google Ventures and TPG Capital had paid to invest in Uber the previous July. Take it or hold it. The employee also learned that Uber had amended its bylaws more than a year earlier, in order to restrict unapproved secondary sales. It was unclear if the bylaw change actually applied to shareholders who had not been party to the vote — lawyers seem to disagree on this point of Delaware law — but Uber threatened litigation if he tried to proceed. So he held. The financial and reputational hassles of a lawsuit would have just been too much, even if he had won. [1]: http://fortune.com/2014/06/20/uber-plays-hardball-with-early-shareholders/ http://fortune.com/2014/06/20/uber-plays-hardball-with-early...
      - shostack 11y ago
        Really interesting, thanks for sharing. Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this.
        mavelikara 11y ago
        > Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this. No, it should not piss off any employer! The equity that is offered to you to as part of your employment is remuneration for your efforts. The employer should not be upset at you for wanting to convert that to cash. It is true that the employer might not want their stock to go to outside parties. In that case, they should arrange for alternate arrangements (buybacks, employee-liquidity in funding rounds etc). But you are not doing anything inherently unethical to warrant any retaliation.
        djhn 11y ago
  - thwarted 11y ago
    1) prevent covert takeover from the original founders Wouldn't this be more reliable to do by keeping control via different classes of stock and or limiting the total size of the employee option pool to some significantly less percentage than the founders have? What's the most common/recommended size of the employee option pool (I want to say I've heard it is like 5-15% depending on the age of the company)?
  - pjlegato 11y ago
    More typically, the company has the "right of first refusal" -- when a stockholder has an outside offer, they are first required to let the company buy their stock back at the price that the outsider is offering before selling to an outsider. This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations.
    - throw2192015 11y ago
      > This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations. I _think_ the JOBS Act of 2012 increased this to 2000 instead of 500.
- jluxenberg 11y ago
  Side note: You're considered an "accredited investor" if you made $200k/year in each of the prior two years and expect a similar income in the current year. https://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors https://www.investor.gov/news-alerts/investor-bulletins/inve... So, not necessarily just "wealthy" individuals.
  - personjerry 11y ago
    That's pretty wealthy by most standards, isn't it?
    - colinbartlett 11y ago
      I think the point was that you don't necessary need wealth (assets) for which the threshold is $1 USD Million excluding the value of your primary residence. You can instead have a high income (the $200k mentioned) and zero wealth. I suspect that many more people qualify as accredited under the income requirement than qualify under the asset requirement.
      - ddlatham 11y ago
        I suspect the opposite http://money.cnn.com/2014/03/14/news/economy/us-millionaires-households/ http://money.cnn.com/2014/03/14/news/economy/us-millionaires...
    - pjlegato 11y ago
      Yes, though in San Francisco it isn't, because the cost of living is so insanely high.
    - TuringNYC 11y ago
      Yes, except in places like SF. That sort of income wont afford you more than a 1br (assuming you want to buy.)
  - zardo 11y ago
    So... "incomey" individuals then?
- nradov 11y ago
  The dirty little secret is that most of those secondary market exchanges don't really verify accredited investor status. They just do the bare minimum to check off the boxes and ensure SEC compliance. Acquaintances of mine were able to purchase shares by simply lying about their incomes and assets.
- prostoalex 11y ago
  That is correct, the reason for such regulation is depicted in the movie "Wolf of Wall Street", where Florida grandmas are being pitched some "incredible opportunities". If you're a seller and you did not verify investor accreditation, you're opening yourself up to a lawsuit when things go bad with the investment - what if the buyer comes back and claims he was defrauded and duped into buying shaky securities? The broker participating in such transaction, in theory, has a chance of having their license revoked due to participation in alleged fraud.
grandalf 11y ago
I use Evernote (paid plan), but it's been my impression that the level of intuitiveness of the UX has steadily declined, to the point where I have no idea what to click to make it do what I want. Like Yahoo, some companies are very challenged when it comes to building intuitive UI/UX. It's too bad the market focuses on financial performance and market share rather than more fundamental aspects of competence.
- apetrovic 11y ago
  Couple of years ago I was OneNote user (on Windows). Then I decided to switch to Mac, and moved all my notes to Evernote. I was happy at first, but then Evernote started declining in quality. Microsoft introduced OneNote on the web, on the phone, on the Mac, and last month I switched back. It's free, and it is, at least for me, superior user experience.
  - wlesieutre 11y ago
    I switched from OneNote to Evernote when I got a Surface. The only things I like Evernote better for are its simple file format (OneNote will be harder to get my data out of if I leave) and its Clearly web clipper. Outside of that, OneNote is just better put together and much more intuitive. Being able to draw with a pen is awesome, and the killer feature that makes it work is "Insert Space." You can pick a point and push everything below it down, like you would when making edits in a word processor. All the layout and diagram flexibility of handwritten notes, but without the usual limit that you run out of space or have to work in the margins if you want to go back and add anything in the middle.
dpflan 11y ago
Has any HNer participated in such a secondary sale? I think it could be informative to describe the experience, whom you dealt with, how a price was agreed upon, how your company discussed secondary sales, etc.
- throw2192015 11y ago
  I have participated as a seller. I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal. I filled out some paperwork and sent proof that I was a legitimate seller. SharesPost representative got in touch with my employer. My employer had the right to first refusal which they waived. The process took few weeks with escrow etc, but was smooth. SharesPost charged me a %ge fee. I also had to pay for the escrow service. [1]: http://sharespost.com/ http://sharespost.com/
  - dpflan 11y ago
    Thanks for sharing this. The process does sound straight forward. It seems that you still retained some shares. Did you exercise with the intention of selling a portion on the secondary market?
    - throw2192015 11y ago
      I used some of my savings and a cash bonus I got at work to exercise some of my options. I held on to that stock for a year. The next year I sold a portion of that stock in the transaction described above. I used the proceeds from the sale to replenish my savings, which had taken a small hit due to the AMT from the previous tax year.
  - shostack 11y ago
    How did things work out from a tax perspective if you don't mind my asking? Also, what sort of communication did you have with your company before/during this transaction regarding it? Is this the kind of thing employers might freak out about if they are blindsided by the request?
sixQuarks 11y ago
Sell while you still can. I don't know who would be buying these shares right now.
JavaScriptrr 11y ago
The last couple of years, everytime someone would ask the cliché 'is there a bubble?' Question to a VC, they all waved it away. The questions were legit because of the insane valuations that have been thrown around. How often in History have companies like MagicLeap for example, got to billion+ valuation before ever launching a product. Evernote is a legit business, yes but same story. Blown up by investors. The bubble is cracking.
- MicroBerto 11y ago
  The unicorn valuation bubble seems to be cracking, sure, but what does that mean for the average tech employee? Average citizen? I'm concerned but still not convinced this will shock the rest of the economy, at least not all on its own.
  - adventured 11y ago
    It's almost entirely irrelevant to the rest of the economy. That is not an exaggeration. During the dotcom bubble crash, Cisco all by itself destroyed more market cap from top to bottom than the entire unicorn bubble is worth combined (and that's before inflation adjusting for 15 years). This current tiny mess? It's hardly even a single line sideshow to the rest of the US or global economy, what's going on in China, the commodity markets, negative interest rates in Europe or Japan, etc. A ~1% value drop in just the US residential housing market is worth as much as every unicorn combined.
- tayo42 11y ago
  I don't understand why magic leap has so much investment with nothing to show. Just in general I don't see how it could be worth that much. It's cool in a nerd way but doesn't seem to have real value. Like how is this going to make a meaningful impact on the world?
  - prostoalex 11y ago
    with nothing to show to the public I am assuming investors are blown away by something before writing those checks.
deleted 11y ago
[deleted]
roymurdock 11y ago
> Secondary sales totaled $47 billion in 2014, up 80 percent from the previous year, according to investment bank Evercore. Still a relatively small volume of sales we are talking about here. Does anyone have any information on the structure of the secondary market - big players, regulation, etc. The article was light on details.
- prostoalex 11y ago
  Just follow the headlines - Fidelity (FBGRX, FDGRX), Blackrock, T. Rowe Price (PRNHX), GSVC - http://gsvcap.com/charts/ http://gsvcap.com/charts/
sharkweek 11y ago
>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.” That second part... why that isn't ALWAYS the focus is beyond me. Edit: Adding a clarifying statement as my point wasn't specific enough. I'm very aware that early stage investments are VERY speculative, but when we're talking about a company moving into 1BN+ valuation territory, fundamentals should be in focus.
- rhc2104 11y ago
  As a counterexample, Google didn't show ads until 2000. http://googlepress.blogspot.com/2000/10/google-launches-self-service.html http://googlepress.blogspot.com/2000/10/google-launches-self...
  - dkarapetyan 11y ago
    But the fundamentals were not ads. It was solid search. That's what delivered value to users and why they kept coming back.
    - jessedhillon 11y ago
      you are confusing business and technology fundamentals. Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.
      - dkarapetyan 11y ago
        I disagree with the overall sentiment. Doing the right thing technology-wise and delighting users is what made google possible. Technology fundamentals != business fundamentals but the pre-not-bubble-but-maybe-bubble market did not have either one. Many companies were pure buzz with neither business nor technology figured out.
        11y ago
danjayh 11y ago
I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's been gushing into major institutions under the current administration is just as distortive and will be just as disastrous as the 'free' money that the last administration encouraged banks to put into the hands of sub-prime individuals. Maintaining a near-zero interest rate creates artificial demand, and encourages investment of capital in inefficient enterprises. The thought process is "hey, I lose value with money in the bank. I'd be better off if I found something -- anything -- else to do with it!" I think that once things take a turn, housing will also turn again, because in many areas the median house now costs enough that it's beyond the reach of the median person. That environment is unsustainable over a large time scale. Ultimately, we'll need a correction that sticks if we want to avoid repeating these events, and for that to happen we'd need a government willing to tolerate a politically unpalatable permanent reduction in asset prices. (edit/note: I do find it odd that under a Democratic president, the major flows of borrowed cash (debt) have been directed to the big guys, while under a Republican president, they were directed to the little guys. Both were a terrible idea, but it seems backwards for what one would expect.)
- shostack 11y ago
  Do you have data to support that a few unicorn valuations being corrected will spread to the rest of the economy, particularly housing and not just be largely limited to private markets and investors?
  - danjayh 11y ago
    Yes and no. With regard to spreading, just prior observation that adjustments tend to spread. With regard to housing, the observation that the median home price : median income ratio is now above 5.2x, while at the last peak it was only at ~5x. The rate of growth is lower this time, but I don't think it matters because the ratio is still really bad. http://politicalcalculations.blogspot.com/2015/04/the-current-trend-for-us-median-new.html http://politicalcalculations.blogspot.com/2015/04/the-curren...
GeoffreySteven 11y ago
I have done a dozen or so private share sales or purchases. The model I have really come to like is EquityZen's. (https://www.equityzen.com https://www.equityzen.com) Using a crowd sourced approach, a group of accredited investors (buyers) can participate in purchasing a block of shares as a fund. A win for the smaller individual investor who could not normally participate due to various constraints (ie buying power, transaction costs). Likewise, its also a win for sellers and it applies to the Unicorn's of the world. It gives these shareholders access to a market they wouldn't normally access. It seems that selling shares privately is becoming more common, any model that connects a larger group of accredited buyers to accredited sellers is good - IMHO.
jonesb6 11y ago
I predict in the future more people will declare bubbles until there is an actual bubble. Then, even after the bubble is fully deflated, those people will tell everybody about how they predicted this bubble ahead of everybody else. Then time will pass. People will then continue declaring bubbles, until one day they too they can become a true oracle of the bubble world. Then time will pass..
rdxm 11y ago
this is where we find out how badly the SEC f-ed up in allowing these markets to exists...
bcg1 11y ago
I've been in the "its probably a unicorn bubble" camp and I think this is evidence of that, but does this really make a difference outside of those companies and their VCs? What kind of situation could turn this into a systemic risk? Institutional investors getting involved? Is there any evidence of that happening? "Unicorn derivatives"? Is there any indication such a thing might exist? Seems like it is possible that a unicorn crash could just leave a bunch of rich guys in Cali somewhat less rich than when they started. And of course employees might be hurt by this I guess... especially the young ones who traded work for worthless stock. But you know what... I signed up for the army after 9/11 so I know what its like to get bamboozled in your 20's... it sucks but you get over it. If I was in their shoes though I would probably looking to cut my losses and liquidate too.
- matt_wulfeck 11y ago
  Unicorpses are merely a symptom of the greater ailment: long term near-zero interest rates.
ryguytilidie 11y ago
I worked for a company about 18 months ago and the CEO sent an email to everyone "prohibiting" selling your shares on the secondary market because he was worried about a hostile takeover. None of this made sense to me. You're going to restrict your early employees from making money? No one owns more than .5% so why would one be worried at all? To me it just seemed like another example of a CEO believing their employees are second class citizens and that they don't deserve any money until the CEO is RICH.
- rqebmm 11y ago
  > why would one be worried at all? Because the CEO holds less than a decision-making stake to himself? It wouldn't matter that everyone has a tiny percentage if an outside party is willing to spend enough money to buy them all.
dookahku 11y ago
I wonder if this will increase or decrease my chances of getting hired.
- netheril96 11y ago
  I guess decrease. Fewer companies will be hiring, and some of the best people who went to unicorns for their prospect are now back in the market, outcompeting the ordinary ones waiting for a new/better job.
nathanwdavis 11y ago
I was quite disappointed to find the article is not about actual unicorns :-( Where have all the great journalists gone...
sjg007 11y ago
Yep and it sucks.
junto 11y ago
Here comes the gold rush and anything else people believe they can secure their money and weather the storm. The trick now is to work out where the bottom of the market crash is going to be, and cash in on the companies that will survive this next recession, but whose stock price is still being hammered.
acd 11y ago
Lets get the mythical horse animals straight first. A mythical horse animal that can fly is called a Pegasi. A unicorn another mythical horse animal doesn't have wings. In startup terms there often mentions of runway and burn rate. Now the magical horses is running down the runway without wings. My guess is that there will be a whole lot of unicorns and very few Pegasi. Tom Petty - Learnig to fly lyrics "Well I started out down a dirty road Started out all alone And the sun went down as I crossed the hill And the town lit up, the world got still I'm learning to fly, but I ain't got wings Coming down is the hardest thing Well, the good ol' days may not return And the rocks might melt and the sea may burn"

165 points by ap3 11y ago

Semi related question: One has to be an accredited (i.e. wealthy) investor to invest in startups, but this does not apply to employees exercising options. Does that mean that employees who do not meet the wealth requirements to be accredited are only ever able to sell ownership, and only to accredited investors?

ska 11y ago
This depends on jurisdiction of course, but employees may also be able to invest, even if they don't meet the requirements. It's not easy for an employee to get access to a secondary market anyway, but yes they should also be enforcing the transaction rules.
dhj 11y ago
If the company is private then employees exercising options generally (always?) have clauses that restrict them from selling that stock whether they are accredited investors or not. Not a lawyer, but I think there may be two reasons: 1) prevent covert takeover from the original founders 2) prevent a general market for private companies (before IPO). IPO involves a lot of regulatory overhead to confirm full disclosure. I think the restriction is to maintain control, but it may be a legal requirement before public market. In other words you can't sell except as part of a board approved sale of the company or a public offering. I think opportunities to buy are based on new issuance of stock (for accredited investors) not based on trades of existing stock.
- shimon 11y ago
  I too assumed this limitation was widespread. But if unicorns are high-valued private companies, and there is a secondary market for their stock, then surely some holders are not restricted this way. Anyone know why / what triggers that? When is it typical for stock granted to employees to actually be resellable?
  - mavelikara 11y ago
    Depends on the terms under which the employee is issued stock. From a 2014 article[1]: Two months ago, an early Uber employee thought that he had found a buyer for his vested stock, at $200 per share. But when his agent tried to seal the deal, Uber refused to sign off on the transfer. Instead, it offered to buy back the shares for around $135 a piece, which is within the same price range that Google Ventures and TPG Capital had paid to invest in Uber the previous July. Take it or hold it. The employee also learned that Uber had amended its bylaws more than a year earlier, in order to restrict unapproved secondary sales. It was unclear if the bylaw change actually applied to shareholders who had not been party to the vote — lawyers seem to disagree on this point of Delaware law — but Uber threatened litigation if he tried to proceed. So he held. The financial and reputational hassles of a lawsuit would have just been too much, even if he had won. [1]: http://fortune.com/2014/06/20/uber-plays-hardball-with-early-shareholders/ http://fortune.com/2014/06/20/uber-plays-hardball-with-early...
    - shostack 11y ago
      Really interesting, thanks for sharing. Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this.
      - mavelikara 11y ago
        > Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this. No, it should not piss off any employer! The equity that is offered to you to as part of your employment is remuneration for your efforts. The employer should not be upset at you for wanting to convert that to cash. It is true that the employer might not want their stock to go to outside parties. In that case, they should arrange for alternate arrangements (buybacks, employee-liquidity in funding rounds etc). But you are not doing anything inherently unethical to warrant any retaliation.
        djhn 11y ago
- thwarted 11y ago
  1) prevent covert takeover from the original founders Wouldn't this be more reliable to do by keeping control via different classes of stock and or limiting the total size of the employee option pool to some significantly less percentage than the founders have? What's the most common/recommended size of the employee option pool (I want to say I've heard it is like 5-15% depending on the age of the company)?
- pjlegato 11y ago
  More typically, the company has the "right of first refusal" -- when a stockholder has an outside offer, they are first required to let the company buy their stock back at the price that the outsider is offering before selling to an outsider. This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations.
  - throw2192015 11y ago
    > This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations. I _think_ the JOBS Act of 2012 increased this to 2000 instead of 500.
jluxenberg 11y ago
Side note: You're considered an "accredited investor" if you made $200k/year in each of the prior two years and expect a similar income in the current year. https://www.investor.gov/news-alerts/investor-bulletins/investor-bulletin-accredited-investors https://www.investor.gov/news-alerts/investor-bulletins/inve... So, not necessarily just "wealthy" individuals.
- personjerry 11y ago
  That's pretty wealthy by most standards, isn't it?
  - colinbartlett 11y ago
    I think the point was that you don't necessary need wealth (assets) for which the threshold is $1 USD Million excluding the value of your primary residence. You can instead have a high income (the $200k mentioned) and zero wealth. I suspect that many more people qualify as accredited under the income requirement than qualify under the asset requirement.
    - ddlatham 11y ago
      I suspect the opposite http://money.cnn.com/2014/03/14/news/economy/us-millionaires-households/ http://money.cnn.com/2014/03/14/news/economy/us-millionaires...
  - pjlegato 11y ago
    Yes, though in San Francisco it isn't, because the cost of living is so insanely high.
  - TuringNYC 11y ago
    Yes, except in places like SF. That sort of income wont afford you more than a 1br (assuming you want to buy.)
- zardo 11y ago
  So... "incomey" individuals then?
nradov 11y ago
The dirty little secret is that most of those secondary market exchanges don't really verify accredited investor status. They just do the bare minimum to check off the boxes and ensure SEC compliance. Acquaintances of mine were able to purchase shares by simply lying about their incomes and assets.
prostoalex 11y ago
That is correct, the reason for such regulation is depicted in the movie "Wolf of Wall Street", where Florida grandmas are being pitched some "incredible opportunities". If you're a seller and you did not verify investor accreditation, you're opening yourself up to a lawsuit when things go bad with the investment - what if the buyer comes back and claims he was defrauded and duped into buying shaky securities? The broker participating in such transaction, in theory, has a chance of having their license revoked due to participation in alleged fraud.

grandalf 11y ago

I use Evernote (paid plan), but it's been my impression that the level of intuitiveness of the UX has steadily declined, to the point where I have no idea what to click to make it do what I want. Like Yahoo, some companies are very challenged when it comes to building intuitive UI/UX. It's too bad the market focuses on financial performance and market share rather than more fundamental aspects of competence.

apetrovic 11y ago
Couple of years ago I was OneNote user (on Windows). Then I decided to switch to Mac, and moved all my notes to Evernote. I was happy at first, but then Evernote started declining in quality. Microsoft introduced OneNote on the web, on the phone, on the Mac, and last month I switched back. It's free, and it is, at least for me, superior user experience.
- wlesieutre 11y ago
  I switched from OneNote to Evernote when I got a Surface. The only things I like Evernote better for are its simple file format (OneNote will be harder to get my data out of if I leave) and its Clearly web clipper. Outside of that, OneNote is just better put together and much more intuitive. Being able to draw with a pen is awesome, and the killer feature that makes it work is "Insert Space." You can pick a point and push everything below it down, like you would when making edits in a word processor. All the layout and diagram flexibility of handwritten notes, but without the usual limit that you run out of space or have to work in the margins if you want to go back and add anything in the middle.

dpflan 11y ago

Has any HNer participated in such a secondary sale? I think it could be informative to describe the experience, whom you dealt with, how a price was agreed upon, how your company discussed secondary sales, etc.

throw2192015 11y ago
I have participated as a seller. I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal. I filled out some paperwork and sent proof that I was a legitimate seller. SharesPost representative got in touch with my employer. My employer had the right to first refusal which they waived. The process took few weeks with escrow etc, but was smooth. SharesPost charged me a %ge fee. I also had to pay for the escrow service. [1]: http://sharespost.com/ http://sharespost.com/
- dpflan 11y ago
  Thanks for sharing this. The process does sound straight forward. It seems that you still retained some shares. Did you exercise with the intention of selling a portion on the secondary market?
  - throw2192015 11y ago
    I used some of my savings and a cash bonus I got at work to exercise some of my options. I held on to that stock for a year. The next year I sold a portion of that stock in the transaction described above. I used the proceeds from the sale to replenish my savings, which had taken a small hit due to the AMT from the previous tax year.
- shostack 11y ago
  How did things work out from a tax perspective if you don't mind my asking? Also, what sort of communication did you have with your company before/during this transaction regarding it? Is this the kind of thing employers might freak out about if they are blindsided by the request?

sixQuarks 11y ago

Sell while you still can. I don't know who would be buying these shares right now.

JavaScriptrr 11y ago

The last couple of years, everytime someone would ask the cliché 'is there a bubble?' Question to a VC, they all waved it away. The questions were legit because of the insane valuations that have been thrown around. How often in History have companies like MagicLeap for example, got to billion+ valuation before ever launching a product. Evernote is a legit business, yes but same story. Blown up by investors. The bubble is cracking.

MicroBerto 11y ago
The unicorn valuation bubble seems to be cracking, sure, but what does that mean for the average tech employee? Average citizen? I'm concerned but still not convinced this will shock the rest of the economy, at least not all on its own.
- adventured 11y ago
  It's almost entirely irrelevant to the rest of the economy. That is not an exaggeration. During the dotcom bubble crash, Cisco all by itself destroyed more market cap from top to bottom than the entire unicorn bubble is worth combined (and that's before inflation adjusting for 15 years). This current tiny mess? It's hardly even a single line sideshow to the rest of the US or global economy, what's going on in China, the commodity markets, negative interest rates in Europe or Japan, etc. A ~1% value drop in just the US residential housing market is worth as much as every unicorn combined.
tayo42 11y ago
I don't understand why magic leap has so much investment with nothing to show. Just in general I don't see how it could be worth that much. It's cool in a nerd way but doesn't seem to have real value. Like how is this going to make a meaningful impact on the world?
- prostoalex 11y ago
  with nothing to show to the public I am assuming investors are blown away by something before writing those checks.

deleted 11y ago

[deleted]

roymurdock 11y ago

> Secondary sales totaled $47 billion in 2014, up 80 percent from the previous year, according to investment bank Evercore. Still a relatively small volume of sales we are talking about here. Does anyone have any information on the structure of the secondary market - big players, regulation, etc. The article was light on details.

prostoalex 11y ago
Just follow the headlines - Fidelity (FBGRX, FDGRX), Blackrock, T. Rowe Price (PRNHX), GSVC - http://gsvcap.com/charts/ http://gsvcap.com/charts/

sharkweek 11y ago

>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.” That second part... why that isn't ALWAYS the focus is beyond me. Edit: Adding a clarifying statement as my point wasn't specific enough. I'm very aware that early stage investments are VERY speculative, but when we're talking about a company moving into 1BN+ valuation territory, fundamentals should be in focus.

rhc2104 11y ago
As a counterexample, Google didn't show ads until 2000. http://googlepress.blogspot.com/2000/10/google-launches-self-service.html http://googlepress.blogspot.com/2000/10/google-launches-self...
- dkarapetyan 11y ago
  But the fundamentals were not ads. It was solid search. That's what delivered value to users and why they kept coming back.
  - jessedhillon 11y ago
    you are confusing business and technology fundamentals. Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.
    - dkarapetyan 11y ago
      I disagree with the overall sentiment. Doing the right thing technology-wise and delighting users is what made google possible. Technology fundamentals != business fundamentals but the pre-not-bubble-but-maybe-bubble market did not have either one. Many companies were pure buzz with neither business nor technology figured out.
      - 11y ago

danjayh 11y ago

I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's been gushing into major institutions under the current administration is just as distortive and will be just as disastrous as the 'free' money that the last administration encouraged banks to put into the hands of sub-prime individuals. Maintaining a near-zero interest rate creates artificial demand, and encourages investment of capital in inefficient enterprises. The thought process is "hey, I lose value with money in the bank. I'd be better off if I found something -- anything -- else to do with it!" I think that once things take a turn, housing will also turn again, because in many areas the median house now costs enough that it's beyond the reach of the median person. That environment is unsustainable over a large time scale. Ultimately, we'll need a correction that sticks if we want to avoid repeating these events, and for that to happen we'd need a government willing to tolerate a politically unpalatable permanent reduction in asset prices. (edit/note: I do find it odd that under a Democratic president, the major flows of borrowed cash (debt) have been directed to the big guys, while under a Republican president, they were directed to the little guys. Both were a terrible idea, but it seems backwards for what one would expect.)

shostack 11y ago
Do you have data to support that a few unicorn valuations being corrected will spread to the rest of the economy, particularly housing and not just be largely limited to private markets and investors?
- danjayh 11y ago
  Yes and no. With regard to spreading, just prior observation that adjustments tend to spread. With regard to housing, the observation that the median home price : median income ratio is now above 5.2x, while at the last peak it was only at ~5x. The rate of growth is lower this time, but I don't think it matters because the ratio is still really bad. http://politicalcalculations.blogspot.com/2015/04/the-current-trend-for-us-median-new.html http://politicalcalculations.blogspot.com/2015/04/the-curren...

GeoffreySteven 11y ago

I have done a dozen or so private share sales or purchases. The model I have really come to like is EquityZen's. (https://www.equityzen.com https://www.equityzen.com) Using a crowd sourced approach, a group of accredited investors (buyers) can participate in purchasing a block of shares as a fund. A win for the smaller individual investor who could not normally participate due to various constraints (ie buying power, transaction costs). Likewise, its also a win for sellers and it applies to the Unicorn's of the world. It gives these shareholders access to a market they wouldn't normally access. It seems that selling shares privately is becoming more common, any model that connects a larger group of accredited buyers to accredited sellers is good - IMHO.

jonesb6 11y ago

I predict in the future more people will declare bubbles until there is an actual bubble. Then, even after the bubble is fully deflated, those people will tell everybody about how they predicted this bubble ahead of everybody else. Then time will pass. People will then continue declaring bubbles, until one day they too they can become a true oracle of the bubble world. Then time will pass..

rdxm 11y ago

this is where we find out how badly the SEC f-ed up in allowing these markets to exists...

bcg1 11y ago

I've been in the "its probably a unicorn bubble" camp and I think this is evidence of that, but does this really make a difference outside of those companies and their VCs? What kind of situation could turn this into a systemic risk? Institutional investors getting involved? Is there any evidence of that happening? "Unicorn derivatives"? Is there any indication such a thing might exist? Seems like it is possible that a unicorn crash could just leave a bunch of rich guys in Cali somewhat less rich than when they started. And of course employees might be hurt by this I guess... especially the young ones who traded work for worthless stock. But you know what... I signed up for the army after 9/11 so I know what its like to get bamboozled in your 20's... it sucks but you get over it. If I was in their shoes though I would probably looking to cut my losses and liquidate too.

matt_wulfeck 11y ago
Unicorpses are merely a symptom of the greater ailment: long term near-zero interest rates.

ryguytilidie 11y ago

I worked for a company about 18 months ago and the CEO sent an email to everyone "prohibiting" selling your shares on the secondary market because he was worried about a hostile takeover. None of this made sense to me. You're going to restrict your early employees from making money? No one owns more than .5% so why would one be worried at all? To me it just seemed like another example of a CEO believing their employees are second class citizens and that they don't deserve any money until the CEO is RICH.

rqebmm 11y ago
> why would one be worried at all? Because the CEO holds less than a decision-making stake to himself? It wouldn't matter that everyone has a tiny percentage if an outside party is willing to spend enough money to buy them all.

dookahku 11y ago

I wonder if this will increase or decrease my chances of getting hired.

netheril96 11y ago
I guess decrease. Fewer companies will be hiring, and some of the best people who went to unicorns for their prospect are now back in the market, outcompeting the ordinary ones waiting for a new/better job.

nathanwdavis 11y ago

I was quite disappointed to find the article is not about actual unicorns :-( Where have all the great journalists gone...

sjg007 11y ago

Yep and it sucks.

junto 11y ago

Here comes the gold rush and anything else people believe they can secure their money and weather the storm. The trick now is to work out where the bottom of the market crash is going to be, and cash in on the companies that will survive this next recession, but whose stock price is still being hammered.

acd 11y ago

Lets get the mythical horse animals straight first. A mythical horse animal that can fly is called a Pegasi. A unicorn another mythical horse animal doesn't have wings. In startup terms there often mentions of runway and burn rate. Now the magical horses is running down the runway without wings. My guess is that there will be a whole lot of unicorns and very few Pegasi. Tom Petty - Learnig to fly lyrics "Well I started out down a dirty road Started out all alone And the sun went down as I crossed the hill And the town lit up, the world got still I'm learning to fly, but I ain't got wings Coming down is the hardest thing Well, the good ol' days may not return And the rocks might melt and the sea may burn"