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The problem employees have is that they cannot sell their shares because the company is private. If Stripe was public, considering they would be a big player,

The problem employees have is that they cannot sell their shares because the company is private. If Stripe was public, considering they would be a big player, buying and selling shares would be instant on your favourite platform/bank. However you look at it, missing the previous favourable window for an IPO is a huge mistake.

muzz 4y ago
Isn't there a secondary market for the shares? Also, if/when a company has too many shareholders it has to release it's financials to the public, and at that point it might as well be public. Facebook faced this issue in 2012, although not sure if the law has changed since then.
- JumpCrisscross 4y ago
  > a secondary market for the shares Only for Stripe’s investors, founders and early executives.
- granshaw 4y ago
  No. Hardly any startup allows common employees to sell options on the secondary market
  - MarkMarine 4y ago
    It's worked for me, and I know there was a pretty healthy secondary market for some of the big tech unicorns before they went public. I sold pre-market shares in a large education startup about a year before IPO, at about 50% of the IPO price, so it was a loser for me and a win for the investor in Cypress that bought the shares.
    - skeeter2020 4y ago
      I think you were the exception though; I've never seen a start-up up close that allows you to trade or even pledge your equity for any purposes.
      - iou 4y ago
        [dead]
      - myhrvold 4y ago
        Yes; the idea is that the startup wants control for who will be on the cap table, so they don't hassle with written requests for info etcetera. Minority shareholders (especially for California businesses) have a fair number of information rights, and so companies tread cautiously in terms of who they allow to invest. This is in part why special purposes vehicles exist so that there's a point of contact for investment. (And then the company doesn't have to vet people that invest in that syndication as much...)
acjacobson 4y ago
That's what this round is for - to allow employees to sell some of their shares.
- twblalock 4y ago
  At what price? Certainly not a market price. A contrived price in a private sale is usually going to screw the seller.
  - scarface74 4y ago
    As opposed to holding a bunch of illiquid Monopoly money? I work for a public company. I sell all of my RSUs and diversify when I vest. I wouldn’t use 30% of my cash compensation to buy my company’s stock, why would I hold on to 30% of my compensation in company stop? If you haven’t checked lately, the public markets don’t exactly have the stomach for money losing companies.
    - twblalock 4y ago
      The problem is that when you sell shares denominated in monopoly money (e.g. shares in a private company) you have no idea if you get a fair price. There is no market to provide the signals.
      - scarface74 4y ago
        I would rather take my chances and not hold on to it. I know eventually the stock in the company i work for will go up. But I would much rather be diversified
    - smileysteve 4y ago
      they weren't going to be able to hold; they were at the 10 year expiration.
- mousebunny 4y ago
  What's Stripe's incentive to do this? Is it just to keep employees happy?
gkoberger 4y ago
They've raised this round to provide liquidity to former and current employees.
- dymk 4y ago
  Years too late and diluting their valuation even further
  - mind-blight 4y ago
    There shouldn't be any dilution. All new shares being sold to investors are 1:1 with stock from the employee pool
    - shuckles 4y ago
      That doesn't account for the new shares being (presumably) preferred while the purchased stock are common stock.
      - abofh 4y ago
        If there are no new shares, it's hard to prefer them.
        shuckles 4y ago
        You can have no net new shares while still swapping common for preferred. I don’t know if that’s what’s happening here.
      - shivaas 4y ago
        When you do a private tender offer like this, either the company or the new investors purchase common stock from employees. It's possible Stripe is issuing some preferred shares to investors as part of the transaction, but that is being offset by it acquiring common stock from employees (eg: issue 100 preferred, buy back 100 common. Net result: 0 dilution to the cap table).
nailer 4y ago
(Genuine question, not being argumentative) Why isn’t it possible for someone to sell their shares privately?
- Galanwe 4y ago
  I don't know for Stripe specifically, but I have been partner at some companies and can share some reasons from my experience: - There are often limitations to who you can sell to, often in the form of requiring board approval before a sale. This is to ensure ownership of the company does not diverge too much from stakeholders. - There are also often PUTs and CALLs in the shareholders agreement (e.g. the company can exercise a call on your shares if you leave, often with a discount if you're dismissed with reason, and you can exercise a put with some vesting scheme), along with a matching valuation formula. This often acts as a range for the sale of (often very illiquid) shares. Effectively, that formula is often really not interesting for pre-benefits startups, as its often some variation of "the average of the latest two previous years of dividends annualized for the next 5 years".
  - nailer 4y ago
    That’s a pity. As an investor I’d love to buy shares of Stripe, Epic, and other unlisted companies.

muzz 4y ago

Isn't there a secondary market for the shares? Also, if/when a company has too many shareholders it has to release it's financials to the public, and at that point it might as well be public. Facebook faced this issue in 2012, although not sure if the law has changed since then.

JumpCrisscross 4y ago
> a secondary market for the shares Only for Stripe’s investors, founders and early executives.
granshaw 4y ago
No. Hardly any startup allows common employees to sell options on the secondary market
- MarkMarine 4y ago
  It's worked for me, and I know there was a pretty healthy secondary market for some of the big tech unicorns before they went public. I sold pre-market shares in a large education startup about a year before IPO, at about 50% of the IPO price, so it was a loser for me and a win for the investor in Cypress that bought the shares.
  - skeeter2020 4y ago
    I think you were the exception though; I've never seen a start-up up close that allows you to trade or even pledge your equity for any purposes.
    - iou 4y ago
      [dead]
    - myhrvold 4y ago
      Yes; the idea is that the startup wants control for who will be on the cap table, so they don't hassle with written requests for info etcetera. Minority shareholders (especially for California businesses) have a fair number of information rights, and so companies tread cautiously in terms of who they allow to invest. This is in part why special purposes vehicles exist so that there's a point of contact for investment. (And then the company doesn't have to vet people that invest in that syndication as much...)

acjacobson 4y ago

That's what this round is for - to allow employees to sell some of their shares.

twblalock 4y ago
At what price? Certainly not a market price. A contrived price in a private sale is usually going to screw the seller.
- scarface74 4y ago
  As opposed to holding a bunch of illiquid Monopoly money? I work for a public company. I sell all of my RSUs and diversify when I vest. I wouldn’t use 30% of my cash compensation to buy my company’s stock, why would I hold on to 30% of my compensation in company stop? If you haven’t checked lately, the public markets don’t exactly have the stomach for money losing companies.
  - twblalock 4y ago
    The problem is that when you sell shares denominated in monopoly money (e.g. shares in a private company) you have no idea if you get a fair price. There is no market to provide the signals.
    - scarface74 4y ago
      I would rather take my chances and not hold on to it. I know eventually the stock in the company i work for will go up. But I would much rather be diversified
  - smileysteve 4y ago
    they weren't going to be able to hold; they were at the 10 year expiration.
mousebunny 4y ago
What's Stripe's incentive to do this? Is it just to keep employees happy?

gkoberger 4y ago

They've raised this round to provide liquidity to former and current employees.

dymk 4y ago
Years too late and diluting their valuation even further
- mind-blight 4y ago
  There shouldn't be any dilution. All new shares being sold to investors are 1:1 with stock from the employee pool
  - shuckles 4y ago
    That doesn't account for the new shares being (presumably) preferred while the purchased stock are common stock.
    - abofh 4y ago
      If there are no new shares, it's hard to prefer them.
      - shuckles 4y ago
        You can have no net new shares while still swapping common for preferred. I don’t know if that’s what’s happening here.
    - shivaas 4y ago
      When you do a private tender offer like this, either the company or the new investors purchase common stock from employees. It's possible Stripe is issuing some preferred shares to investors as part of the transaction, but that is being offset by it acquiring common stock from employees (eg: issue 100 preferred, buy back 100 common. Net result: 0 dilution to the cap table).

nailer 4y ago

(Genuine question, not being argumentative) Why isn’t it possible for someone to sell their shares privately?

Galanwe 4y ago
I don't know for Stripe specifically, but I have been partner at some companies and can share some reasons from my experience: - There are often limitations to who you can sell to, often in the form of requiring board approval before a sale. This is to ensure ownership of the company does not diverge too much from stakeholders. - There are also often PUTs and CALLs in the shareholders agreement (e.g. the company can exercise a call on your shares if you leave, often with a discount if you're dismissed with reason, and you can exercise a put with some vesting scheme), along with a matching valuation formula. This often acts as a range for the sale of (often very illiquid) shares. Effectively, that formula is often really not interesting for pre-benefits startups, as its often some variation of "the average of the latest two previous years of dividends annualized for the next 5 years".
- nailer 4y ago
  That’s a pity. As an investor I’d love to buy shares of Stripe, Epic, and other unlisted companies.