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OP: I read your message a couple of times over and am assuming that you own the millions in stocks outright (and not options). I'm also going to assume that, y

OP: I read your message a couple of times over and am assuming that you own the millions in stocks outright (and not options). I'm also going to assume that, you're asking us for advice because you don't have the cash to pay a lawyer for a couple of hours of their time ;) In this case, I suggest reading the OG literature: https://www.sec.gov/reportspubs/investor-publications/investorpubsrule144 https://www.sec.gov/reportspubs/investor-publications/invest... Find out if the state where your company is registered has rules that'll help you learn one way or another. Personally, I think it's very fishy that a company would be allowed to sell a non-employee shares that they can't resell to someone else - I suspect that language in the options agreement is illegal. Perhaps it is possible to sell your shares to the people "as is" - make it their problem, along with a full disclosure of the original options / stock sale agreement. In any case, you'll need a competent lawyer's help in interpreting the options agreement, and the resale agreement, since the company is still private, so uhh... find the money to pay a lawyer.

BaseballPhysics 3y ago
> Personally, I think it's very fishy that a company would be allowed to sell a non-employee shares that they can't resell to someone else - I suspect that language in the options agreement is illegal. This is absolutely wrong. First, you're assuming they weren't an employee but they likely were when they exercised their options. Most likely they chose to leave and had vested options they had to either exercise or give up. It's quite a common situation and one I've personally witnessed. Second, non-transferrance clauses for shares in private companies is quite common.
- stock-throwaway 3y ago
  To clarify, yes I own the shares outright. I believe non-transferability clauses are common these days, ever since some shenanigans with employees selling shares ahead of the AirBnB IPO. But does it hold up in court? It seems bizarre that I can "own" something and yet have no rights that people typically associate with owning something.
  - BaseballPhysics 3y ago
    Well, it might seem weird to you, but unfortunately it's not. Private company shares aren't furniture. They aren't physical property and they don't come with traditional resale rights. In buying those shares you signed a contract that came with stipulations. One of those stipulations is that you cannot transfer ownership to anyone else. It's perfectly normal and very common. I just hope you're not realizing this for the first time, now, after you already laid out the capital to exercise those options.
    - stock-throwaway 3y ago
      Do you think this is common knowledge though? I'm pretty sure all YC companies have limited transferability clauses now. And with the rise of IPO-scale private fundraising, it's possible that a company can remain private literally forever. This changes the calculus for a young person considering joining early at a startup and I'm not sure that is a good thing for the startup ecosystem.
      - BaseballPhysics 3y ago
        Honestly, I know the horse is waaay out of the barn for you, but anyone considering laying out 100k+ on an asset should consult a lawyer and/or an accountant and just assume they don't know shit. You don't need "common knowledge". You just need to know enough to know you don't know and need to consult folks who do. > And with the rise of IPO-scale private fundraising, it's possible that a company can remain private literally forever. Disagree. Investors always want an exit. They don't put cash in out of the goodness of their hearts. Yes they're willing to wait a lot longer and put up a lot more cash, but ultimately they're looking for their 10x, and that means an IPO or acquisition. That said, speaking for myself, it was over ten years from founding to exit. So yeah, you gotta be prepared to wait a while if you opt for equity over base pay.
        stock-throwaway 3y ago
        Investors don't have transfer restrictions on preferred shares!! Only employees have transfer restrictions because they have common shares. Investors can sell on secondary markets whenever they want, and for the company in question -- they are!
- givemeethekeys 3y ago
  I disagree. If you're a private company, it means that you don't owe anyone outside your company details on your financial performance, and that your shares aren't floated. But if you, the private company, sold a percentage of your property to someone, then that someone most definitely has the right to sell their shares to someone else. You the private company still don't have to disclose your financials to anyone. I think any non-transferability agreement is pure bullshit. I feel bad that OP has to now fight to get whats already his.
  - BaseballPhysics 3y ago
    > I think any non-transferability agreement is pure bullshit. I feel that way about a lot of things. For example, I feel like forced arbitration clauses should be unenforceable. But what I feel and what is legal aren't the same things, and when laying out a huge chunk of capital, it's important to understand the difference.
    - deleted 3y ago
      [deleted]
    - givemeethekeys 3y ago
      Yeah, I think you're correct about that part. Perhaps rights were signed away - lawyers rejoice.
biotechbio 3y ago
It’s fairly common for private companies to have non-transferability clauses for both options and stock. IANAL, but this sounds pretty standard and I doubt OP will be able to fight the legitimacy of the claim. Re: a forward sale, sounds like it blatantly violates the agreement and would expose OP to some obvious risks. Agreed OP should talk to a lawyer. Is anyone else surprised by OP’s indignation? Startups are risky, options aren’t a guaranteed payday, exercising is gamble, and liquidity events are regulated for a reason. Sometimes you lose money. Have we forgotten this?
- BaseballPhysics 3y ago
  > Is anyone else surprised by OP’s indignation? I absolutely am, and got downvoted for saying so.
- stock-throwaway 3y ago
  > Startups are risky, options aren’t a guaranteed payday, exercising is gamble, and liquidity events are regulated for a reason. Sometimes you lose money. Have we forgotten this? I spent around $100k to purchase this stock and paid tax on the gain. They are now worth millions of dollars on the open market, but the company will not allow me to sell them... I understand it's risky, but at this point they just aren't letting me get a payday...
  - BaseballPhysics 3y ago
    > They are now worth millions of dollars on the open market No, they aren't, because there is no open market for private company shares. You have a private company valuation you can base the share price on, but that's it. And even that is typically based on black magic and accounting tricks since, at the risk of repeating myself, there's no open market in which those shares are trading and thus no method for price discovery. And any theoretical transfer of ownership would occur in a private transaction or on a private marketplace that specializes in matching buyers and sellers in private company shares. <chopped this bit out since the dead horse is beaten> Edit: And to provide something a bit more constructive, here: unless some lawyer comes up with something clever--and certainly it's worth exploring your options--my bet is your only real move is to just hold onto those shares and wait. Eventually there may be a liquidity event--probably an acquisition--and hopefully you'll net out positive. You basically bought a 100k lottery ticket. I suspect all you can do now is move on and hope it pays off.
dragonwriter 3y ago
> Personally, I think it's very fishy that a company would be allowed to sell a non-employee shares that they can't resell to someone else OP explicitly says they were an employee and had to exercise options when (implicitly, immediately before) they left not to lose them, so this isn’t an issue of sale to a non-employee.
- givemeethekeys 3y ago
  When they left, they had a certain amount of time to exercise. So, it needn't be that they were still with the company when they exercised the options.

BaseballPhysics 3y ago

> Personally, I think it's very fishy that a company would be allowed to sell a non-employee shares that they can't resell to someone else - I suspect that language in the options agreement is illegal. This is absolutely wrong. First, you're assuming they weren't an employee but they likely were when they exercised their options. Most likely they chose to leave and had vested options they had to either exercise or give up. It's quite a common situation and one I've personally witnessed. Second, non-transferrance clauses for shares in private companies is quite common.

stock-throwaway 3y ago
To clarify, yes I own the shares outright. I believe non-transferability clauses are common these days, ever since some shenanigans with employees selling shares ahead of the AirBnB IPO. But does it hold up in court? It seems bizarre that I can "own" something and yet have no rights that people typically associate with owning something.
- BaseballPhysics 3y ago
  Well, it might seem weird to you, but unfortunately it's not. Private company shares aren't furniture. They aren't physical property and they don't come with traditional resale rights. In buying those shares you signed a contract that came with stipulations. One of those stipulations is that you cannot transfer ownership to anyone else. It's perfectly normal and very common. I just hope you're not realizing this for the first time, now, after you already laid out the capital to exercise those options.
  - stock-throwaway 3y ago
    Do you think this is common knowledge though? I'm pretty sure all YC companies have limited transferability clauses now. And with the rise of IPO-scale private fundraising, it's possible that a company can remain private literally forever. This changes the calculus for a young person considering joining early at a startup and I'm not sure that is a good thing for the startup ecosystem.
    - BaseballPhysics 3y ago
      Honestly, I know the horse is waaay out of the barn for you, but anyone considering laying out 100k+ on an asset should consult a lawyer and/or an accountant and just assume they don't know shit. You don't need "common knowledge". You just need to know enough to know you don't know and need to consult folks who do. > And with the rise of IPO-scale private fundraising, it's possible that a company can remain private literally forever. Disagree. Investors always want an exit. They don't put cash in out of the goodness of their hearts. Yes they're willing to wait a lot longer and put up a lot more cash, but ultimately they're looking for their 10x, and that means an IPO or acquisition. That said, speaking for myself, it was over ten years from founding to exit. So yeah, you gotta be prepared to wait a while if you opt for equity over base pay.
      - stock-throwaway 3y ago
        Investors don't have transfer restrictions on preferred shares!! Only employees have transfer restrictions because they have common shares. Investors can sell on secondary markets whenever they want, and for the company in question -- they are!
givemeethekeys 3y ago
I disagree. If you're a private company, it means that you don't owe anyone outside your company details on your financial performance, and that your shares aren't floated. But if you, the private company, sold a percentage of your property to someone, then that someone most definitely has the right to sell their shares to someone else. You the private company still don't have to disclose your financials to anyone. I think any non-transferability agreement is pure bullshit. I feel bad that OP has to now fight to get whats already his.
- BaseballPhysics 3y ago
  > I think any non-transferability agreement is pure bullshit. I feel that way about a lot of things. For example, I feel like forced arbitration clauses should be unenforceable. But what I feel and what is legal aren't the same things, and when laying out a huge chunk of capital, it's important to understand the difference.
  - deleted 3y ago
    [deleted]
  - givemeethekeys 3y ago
    Yeah, I think you're correct about that part. Perhaps rights were signed away - lawyers rejoice.

biotechbio 3y ago

It’s fairly common for private companies to have non-transferability clauses for both options and stock. IANAL, but this sounds pretty standard and I doubt OP will be able to fight the legitimacy of the claim. Re: a forward sale, sounds like it blatantly violates the agreement and would expose OP to some obvious risks. Agreed OP should talk to a lawyer. Is anyone else surprised by OP’s indignation? Startups are risky, options aren’t a guaranteed payday, exercising is gamble, and liquidity events are regulated for a reason. Sometimes you lose money. Have we forgotten this?

BaseballPhysics 3y ago
> Is anyone else surprised by OP’s indignation? I absolutely am, and got downvoted for saying so.
stock-throwaway 3y ago
> Startups are risky, options aren’t a guaranteed payday, exercising is gamble, and liquidity events are regulated for a reason. Sometimes you lose money. Have we forgotten this? I spent around $100k to purchase this stock and paid tax on the gain. They are now worth millions of dollars on the open market, but the company will not allow me to sell them... I understand it's risky, but at this point they just aren't letting me get a payday...
- BaseballPhysics 3y ago
  > They are now worth millions of dollars on the open market No, they aren't, because there is no open market for private company shares. You have a private company valuation you can base the share price on, but that's it. And even that is typically based on black magic and accounting tricks since, at the risk of repeating myself, there's no open market in which those shares are trading and thus no method for price discovery. And any theoretical transfer of ownership would occur in a private transaction or on a private marketplace that specializes in matching buyers and sellers in private company shares. <chopped this bit out since the dead horse is beaten> Edit: And to provide something a bit more constructive, here: unless some lawyer comes up with something clever--and certainly it's worth exploring your options--my bet is your only real move is to just hold onto those shares and wait. Eventually there may be a liquidity event--probably an acquisition--and hopefully you'll net out positive. You basically bought a 100k lottery ticket. I suspect all you can do now is move on and hope it pays off.

dragonwriter 3y ago

> Personally, I think it's very fishy that a company would be allowed to sell a non-employee shares that they can't resell to someone else OP explicitly says they were an employee and had to exercise options when (implicitly, immediately before) they left not to lose them, so this isn’t an issue of sale to a non-employee.

givemeethekeys 3y ago
When they left, they had a certain amount of time to exercise. So, it needn't be that they were still with the company when they exercised the options.