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I like how Coinbase, trading a largely unregulated 'security', has the moral indignity of telling its own investors that they better not be trading the assets t

I like how Coinbase, trading a largely unregulated 'security', has the moral indignity of telling its own investors that they better not be trading the assets they purchased. The fact that people cant buy or sell shares of private companies is ridiculous in general, but particularly in this case.

optimuspaul 9y ago
I don't think it's ridiculous at all, especially in this case.
- hartator 9y ago
  Crypto is originally about having a more liquid currency. There is some irony in the main company doesn't want its shares to be liquid.
  - x3n0ph3n3 9y ago
    Shares in private companies are rarely liquid and there's no moral or legal reason they should IPO before they are ready.
  - baddox 9y ago
    Why do you say that cryptocurrency was originally about having a more liquid currency? I've heard many states goals of cryptocurrency, and have never seen that goal featured prominently.
x3n0ph3n3 9y ago
That's the deal when you invest in a private company. If you don't like it, don't invest in a private company and only invest in publicly traded companies. There's nothing ridiculous about it.
- conanbatt 9y ago
  Being the way it is doesn't make it not ridiculous. It is absolutely ridiculous that you cant sell a share of a company, something you own, of a company that buys and sells things they don't own.
  - x3n0ph3n3 9y ago
    It's contractual. Abiding by contracts you sign is not ridiculous. These are very wealthy investors and this is part of the game they play. Stop acting like some little person is getting screwed.
    - conanbatt 9y ago
      Its not contractual: by contract you cant sell the shares, but you can sell the futures of the shares, which are not the same thing. What stops you from doing that is the State. So its actually a rule that can only exist because other things are enforced.
  - hmahncke 9y ago
    It’s a private company. That’s among the many reasons that trading in private companies is different than trading in public companies.
Pyxl101 9y ago
Bitcoin is (most likely) not a security. It's a commodity. Securities are typically assets that derive their value from a contractual claim (such as ownership rights to a company), which is not the case with Bitcoin. When you own Bitcoin, you just possess Bitcoin, not any kind of contract claim on some other asset. Bitcoin is more like gold and other commodities in this regard. An analysis of this topic: https://www.bu.edu/jostl/files/2016/01/21.1_Alberts_Final_web.pdf https://www.bu.edu/jostl/files/2016/01/21.1_Alberts_Final_we... Some crypto offerings (ICOs) might be securities depending on what's promised when purchased. If the creator of a coin advertises their ICO as an investment opportunity, where the buyers can expect to see gains from their investment, due to the labor of others, especially when there's no established market for the coin, then that ICO may be a security.
gist 9y ago
> has the moral indignity of telling its own investors that they better not be trading the assets they purchased. The way I read this they are not "telling them" as much as reminding them that legally they are not allowed to do this.
- JumpCrisscross 9y ago
  > legally they are not allowed to do this Shareholders in a Delaware corporation are legally allowed to sell their private shares. The general exemption for this is Regulation D. Most restrictions are of companies’ construction. Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.
  - Pyxl101 9y ago
    I was just about to ask that question: what is the basis for the prohibition on selling shares? How are those prohibitions enforced? If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do. If an employee sells their shares in violation of a company contract, what happens? Can the company repossess the shares? Or are the shares structured so that they can be made worthless? Can employees construct a security based on their shares and then sell that instead? Nominally the employee retains the shares, and sells a contract based on them to someone else - an asset-backed security. The contract is an option that allows the contract-owner to request the shares-owner sell their shares in the event of liquidity, and the contract owner will receive the gains. Alternatively, the share-owner simply holds onto the shares until they are transferrable (eg IPO). In exchange for this the shares-owner is paid an up front fee. Presumably this kind of arrangement could also be prohibited in some way by the company, but if someone is willing to violate that agreement, it would be difficult to discover that the agreement exists.
    - JumpCrisscross 9y ago
      > If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do The record of a private company’s shareholders are maintained by the company. If you try to buy shares in a prohibited transfer, the company won’t recognise the change of ownership. Forcing recognition would require the transacting parties to sue the company; this is frowned upon. That said, yes, companies who block transfers tend to spawn clever financial engineerings. Because of associated legal and banking costs, these structures only make sense for larger trades. Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.
gsylvie 9y ago
If you don't like the terms of the shareholders agreement, then you don't have to buy the (private equity) shares. But if you buy the shares and sign the agreement, I don't see why the directors should honour illegitimate share transfers you attempt to make in the future.
- conanbatt 9y ago
  So if you signed a terms of service of Apple that said all your assets are actually Apple's, you would happily comply?
  - Pyxl101 9y ago
    All contracts have consideration. If the consideration for the agreement that all my assets are Apple's is $1 billion USD, then sure I would happily comply, rather than risk voiding my contract. More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later. Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation. There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons.
    - conanbatt 9y ago
      > More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later. You have read every single word of all the TOS you ever signed? I find that very hard to believe. > Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation. If we talk about the letter of the law, then you don't need to sell the stock, you can sell futures of it at your own compliance. The company can't prevent you from doing that by letter of the law. But the SEC can. The contract is only enforcible in practical terms because as an employee or investor you are disallowed from making any legal claim about the stocks you are entitled to. Also, the argument that it is 'legal' is entirely a different thing. I never mentioned legality, I said ridiculous. Its not a moral, economic or practical argument to say that something is 'legal'. Saying something is legal is one of the lowest forms of defense for an action. Its saying that the only purpose of it is that they cant put you to jail for doing it. > There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons. Very nice, but there is a much more important reason why companies want to not be able to sell off shares: they benefit economically directly because of it. Because the owners get the shares back when people dont buy them, and they have information asymmetry with the employees. AS an employee you have a lot less information. If employees could sell their stocks willy nilly, every employee that leaves a startup and doesnt want to buy stock to keep would sell them in the open market, which would dilute the value of companies big time while making employees richer. Hm.

optimuspaul 9y ago

I don't think it's ridiculous at all, especially in this case.

hartator 9y ago
Crypto is originally about having a more liquid currency. There is some irony in the main company doesn't want its shares to be liquid.
- x3n0ph3n3 9y ago
  Shares in private companies are rarely liquid and there's no moral or legal reason they should IPO before they are ready.
- baddox 9y ago
  Why do you say that cryptocurrency was originally about having a more liquid currency? I've heard many states goals of cryptocurrency, and have never seen that goal featured prominently.

x3n0ph3n3 9y ago

That's the deal when you invest in a private company. If you don't like it, don't invest in a private company and only invest in publicly traded companies. There's nothing ridiculous about it.

conanbatt 9y ago
Being the way it is doesn't make it not ridiculous. It is absolutely ridiculous that you cant sell a share of a company, something you own, of a company that buys and sells things they don't own.
- x3n0ph3n3 9y ago
  It's contractual. Abiding by contracts you sign is not ridiculous. These are very wealthy investors and this is part of the game they play. Stop acting like some little person is getting screwed.
  - conanbatt 9y ago
    Its not contractual: by contract you cant sell the shares, but you can sell the futures of the shares, which are not the same thing. What stops you from doing that is the State. So its actually a rule that can only exist because other things are enforced.
- hmahncke 9y ago
  It’s a private company. That’s among the many reasons that trading in private companies is different than trading in public companies.

Pyxl101 9y ago

Bitcoin is (most likely) not a security. It's a commodity. Securities are typically assets that derive their value from a contractual claim (such as ownership rights to a company), which is not the case with Bitcoin. When you own Bitcoin, you just possess Bitcoin, not any kind of contract claim on some other asset. Bitcoin is more like gold and other commodities in this regard. An analysis of this topic: https://www.bu.edu/jostl/files/2016/01/21.1_Alberts_Final_web.pdf https://www.bu.edu/jostl/files/2016/01/21.1_Alberts_Final_we... Some crypto offerings (ICOs) might be securities depending on what's promised when purchased. If the creator of a coin advertises their ICO as an investment opportunity, where the buyers can expect to see gains from their investment, due to the labor of others, especially when there's no established market for the coin, then that ICO may be a security.

gist 9y ago

> has the moral indignity of telling its own investors that they better not be trading the assets they purchased. The way I read this they are not "telling them" as much as reminding them that legally they are not allowed to do this.

JumpCrisscross 9y ago
> legally they are not allowed to do this Shareholders in a Delaware corporation are legally allowed to sell their private shares. The general exemption for this is Regulation D. Most restrictions are of companies’ construction. Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.
- Pyxl101 9y ago
  I was just about to ask that question: what is the basis for the prohibition on selling shares? How are those prohibitions enforced? If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do. If an employee sells their shares in violation of a company contract, what happens? Can the company repossess the shares? Or are the shares structured so that they can be made worthless? Can employees construct a security based on their shares and then sell that instead? Nominally the employee retains the shares, and sells a contract based on them to someone else - an asset-backed security. The contract is an option that allows the contract-owner to request the shares-owner sell their shares in the event of liquidity, and the contract owner will receive the gains. Alternatively, the share-owner simply holds onto the shares until they are transferrable (eg IPO). In exchange for this the shares-owner is paid an up front fee. Presumably this kind of arrangement could also be prohibited in some way by the company, but if someone is willing to violate that agreement, it would be difficult to discover that the agreement exists.
  - JumpCrisscross 9y ago
    > If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do The record of a private company’s shareholders are maintained by the company. If you try to buy shares in a prohibited transfer, the company won’t recognise the change of ownership. Forcing recognition would require the transacting parties to sue the company; this is frowned upon. That said, yes, companies who block transfers tend to spawn clever financial engineerings. Because of associated legal and banking costs, these structures only make sense for larger trades. Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.

gsylvie 9y ago

If you don't like the terms of the shareholders agreement, then you don't have to buy the (private equity) shares. But if you buy the shares and sign the agreement, I don't see why the directors should honour illegitimate share transfers you attempt to make in the future.

conanbatt 9y ago
So if you signed a terms of service of Apple that said all your assets are actually Apple's, you would happily comply?
- Pyxl101 9y ago
  All contracts have consideration. If the consideration for the agreement that all my assets are Apple's is $1 billion USD, then sure I would happily comply, rather than risk voiding my contract. More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later. Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation. There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons.
  - conanbatt 9y ago
    > More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later. You have read every single word of all the TOS you ever signed? I find that very hard to believe. > Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation. If we talk about the letter of the law, then you don't need to sell the stock, you can sell futures of it at your own compliance. The company can't prevent you from doing that by letter of the law. But the SEC can. The contract is only enforcible in practical terms because as an employee or investor you are disallowed from making any legal claim about the stocks you are entitled to. Also, the argument that it is 'legal' is entirely a different thing. I never mentioned legality, I said ridiculous. Its not a moral, economic or practical argument to say that something is 'legal'. Saying something is legal is one of the lowest forms of defense for an action. Its saying that the only purpose of it is that they cant put you to jail for doing it. > There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons. Very nice, but there is a much more important reason why companies want to not be able to sell off shares: they benefit economically directly because of it. Because the owners get the shares back when people dont buy them, and they have information asymmetry with the employees. AS an employee you have a lot less information. If employees could sell their stocks willy nilly, every employee that leaves a startup and doesnt want to buy stock to keep would sell them in the open market, which would dilute the value of companies big time while making employees richer. Hm.