4 ms·

they might not qualify to be an accredited investor to be a buyer, but I didn't know there were any restrictions on being a seller there? I've got the impressio

by borism 16y ago

they might not qualify to be an accredited investor to be a buyer, but I didn't know there were any restrictions on being a seller there? I've got the impression that all FB employees who had vested stock were able to sell...

tptacek 16y ago
There are contractual restrictions on employees selling their stock; accreditation isn't the issue. Though, for what it's worth, the major secondary markets won't help make a market for tiny companies anyways.
- borism 16y ago
  There might be, but judging by numerous reports of FB and likes employees selling their stock left and right there didn't seem to exist any restrictions at those places. That's the whole point of starting to restrict those deals now, don't you think?
  - tptacek 16y ago
    Two things here. First, there are almost certainly restrictions on Facebook employee stock. I don't know what they are, because I don't work at Facebook, but the boilerplate employee stock contract restricts sale entirely (or gives the company first refusal on sales at a minimal static valuation); anything employees are allowed to do with Facebook stock constitutes something Facebook went out of its way to allow. Secondly, my point isn't about Facebook. I'm responding to Alain, who indicates that this is the start of a worryingly anti-startup-employee trend. But it isn't. Virtually the entire marketplace of startup employees works for companies with far more restrictive policies. You simply cannot normally sell your (private company) employee stock. The companies you're hearing about that do allow it are --- not too much of an exaggeration --- epsilon from IPO already.
    - borism 16y ago
      Absolutely agreed on most parts of second point - the mentioned companies are quite far from being start-ups for quite some time now. But not quite IPO-ready either, didn't FB delay it's own for at least couple of years? I would even argue so far that when a start-up starts participating in those secondary markets it's not a start-up anymore. Your stock can be had by almost anyone (with at least $1000000 that is) without much due diligence etc.
    - alain94040 16y ago
      I'll rephrase my statement that it's "anti-employees". If you go by currently admitted practices, then it's completely fine. But if you raise your standards to figuring out what the future should look like, I'm hoping that 10 years from now, people will wonder why such restrictions were ever in place. Because really, why, at a fundamental level, can't an employee who has vested some shares, not sell them? If I told you that you couldn't spend the cash salary I'm giving you, you'd think I'm crazy. So, if the employee has earned the stock, why is it restricted? I understand the nitty-gritty SEC issues, but fundamentally... why not?
      - tptacek 16y ago
        Even if the SEC registration rules were thoroughly relaxed --- which they won't be any time soon, and which we could spend a thoroughly engaging several hours debating (plus side: rational market for startups, downside: hedge funds gone wild), it wouldn't matter. That's because we're talking about closely held private companies. There is more to being a private company than simply not having public shares; in particular, private companies are typically very careful about who they permit to hold equity, because: * Company shareholders can more easily sue the company * Shareholders may be entitled to information the company doesn't want to disclose (the big one being: revenue) * Shareholders may have enough control rights to foul up investment and M&A activities, which competitors and bad actors might want to exploit. I'm sure there are other reasons too. Long story short: even if there were no SEC regulations, it doesn't seem likely that everyone's employee stock would suddenly become transferable. Employee stock isn't transferable because companies don't want it to be; they use options to express "incentive interest in a future liquidity event of the company", not to distribute ownership of the company to the broader market.

by borism 16y ago

tptacek 16y ago

There are contractual restrictions on employees selling their stock; accreditation isn't the issue. Though, for what it's worth, the major secondary markets won't help make a market for tiny companies anyways.

borism 16y ago
There might be, but judging by numerous reports of FB and likes employees selling their stock left and right there didn't seem to exist any restrictions at those places. That's the whole point of starting to restrict those deals now, don't you think?
- tptacek 16y ago
  Two things here. First, there are almost certainly restrictions on Facebook employee stock. I don't know what they are, because I don't work at Facebook, but the boilerplate employee stock contract restricts sale entirely (or gives the company first refusal on sales at a minimal static valuation); anything employees are allowed to do with Facebook stock constitutes something Facebook went out of its way to allow. Secondly, my point isn't about Facebook. I'm responding to Alain, who indicates that this is the start of a worryingly anti-startup-employee trend. But it isn't. Virtually the entire marketplace of startup employees works for companies with far more restrictive policies. You simply cannot normally sell your (private company) employee stock. The companies you're hearing about that do allow it are --- not too much of an exaggeration --- epsilon from IPO already.
  - borism 16y ago
    Absolutely agreed on most parts of second point - the mentioned companies are quite far from being start-ups for quite some time now. But not quite IPO-ready either, didn't FB delay it's own for at least couple of years? I would even argue so far that when a start-up starts participating in those secondary markets it's not a start-up anymore. Your stock can be had by almost anyone (with at least $1000000 that is) without much due diligence etc.
  - alain94040 16y ago
    I'll rephrase my statement that it's "anti-employees". If you go by currently admitted practices, then it's completely fine. But if you raise your standards to figuring out what the future should look like, I'm hoping that 10 years from now, people will wonder why such restrictions were ever in place. Because really, why, at a fundamental level, can't an employee who has vested some shares, not sell them? If I told you that you couldn't spend the cash salary I'm giving you, you'd think I'm crazy. So, if the employee has earned the stock, why is it restricted? I understand the nitty-gritty SEC issues, but fundamentally... why not?
    - tptacek 16y ago
      Even if the SEC registration rules were thoroughly relaxed --- which they won't be any time soon, and which we could spend a thoroughly engaging several hours debating (plus side: rational market for startups, downside: hedge funds gone wild), it wouldn't matter. That's because we're talking about closely held private companies. There is more to being a private company than simply not having public shares; in particular, private companies are typically very careful about who they permit to hold equity, because: * Company shareholders can more easily sue the company * Shareholders may be entitled to information the company doesn't want to disclose (the big one being: revenue) * Shareholders may have enough control rights to foul up investment and M&A activities, which competitors and bad actors might want to exploit. I'm sure there are other reasons too. Long story short: even if there were no SEC regulations, it doesn't seem likely that everyone's employee stock would suddenly become transferable. Employee stock isn't transferable because companies don't want it to be; they use options to express "incentive interest in a future liquidity event of the company", not to distribute ownership of the company to the broader market.