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Anyone at private companies that has been able to participate in these share sales -- how does it work? What platform is used? Do you sell back to the company a

Anyone at private companies that has been able to participate in these share sales -- how does it work? What platform is used? Do you sell back to the company and then just get an extra large check that month? Can you trade it for shares of something else?

rvz 3y ago
Accredited investors sign up to private market brokers such as EquityZen, Forge or FlexTrade to match sellers of company stock (typically employees) with buyers (mostly outside investors). Depending on market conditions there can be private fundraising through those marketplaces which employees are able to directly sell their existing shares if they want to. This also depends on the company as well to allow this.
- ionwake 3y ago
  Does anyone know if openAI shares are listen on equityzen or will be?
  - sb8244 3y ago
    This is an uneducated opinion, but I'd be absolutely shocked if it's not a major investor that is buying effectively privately. Random people won't be able to get shares.
  - ComputerGuru 3y ago
    It’s up to the individual employee.
- longhaul 3y ago
  Not FlexTrade, they are a trading systems ISV, not a private market broker
maratc 3y ago
In my case, I signed a part of my shares off and received an XL check (after paying XL taxes). That was a "take it or leave it" kind of deal, no platform was used.
- sitkack 3y ago
  So it was a buyback?
  - maratc 3y ago
    To the best of my understanding, it wasn’t a “buyback” as the money came from the new investors and not from the company itself. The new owner of the options (or shares) that were previously mine is the new investor — and again, this is what I understand, it might or might not be the actual case. None of it is my business or of any interest to me, though.
  - dilyevsky 3y ago
    Technical term is “tender offer”, not necessarily buyback - other investors can participate too
- mistrial9 3y ago
  long ago in some deals, you the junior person had to get the money to pay the tax on the transfer before you had a right to sell.. therefore, there was an intermediate step where the junior person might have to borrow money to complete the deal; failing borrowing, the junior person may not be able to take the compensation.
  - yieldcrv 3y ago
    thats still common in less sophisticated startups and markets (they think they are sophisticated though, it just depends on which VCs gave them which legal counsel) but there are a lot of lenders for cashless exercise
toomuchtodo 3y ago
Assuming an outside investor vs a buyback, tender offers are usually done through a platform such as Nasdaq Private Market. Fees are usually much more reasonable vs through marketplaces. Funds are wired at closing. There’s usually a virtual data room available with financials you can share with an attorney and/or financial advisor. https://www.nasdaqprivatemarket.com/ https://www.nasdaqprivatemarket.com/
- JumpCrisscross 3y ago
  > Fees are usually much more reasonable vs through marketplaces Fees on tenders are much higher than in open-market trades, they’re just baked into the buy side. The handshake deal management does with tenders is underpricing the offering so managers can add fees on top. Where open-market transactions happen alongside tenders, at least on the institutional side, it’s not uncommon to see 20%+ premiums.
  - toomuchtodo 3y ago
    What are your thoughts when transactions at open markets aren’t clearing above the tender offer price?
    - JumpCrisscross 3y ago
      > What are your thoughts when transactions at open markets aren’t clearing above the tender offer price? It signals a dysfunction. If before, information asymmetry. This, fortunately, corrected quickly. If during or after, company prospects may have changed since the tender was announced, or the company is restricting transfers to cronies. The latter is quite common, and a major profit centre for growth capital VCs.
      - toomuchtodo 3y ago
        Appreciate it.
realslimjd 3y ago
I've worked places that have used Carta for this. Sometimes the company buys the shares back, but I think the more common case is that it's new investors. You do get a check, but it's separate from your regular one. Sales like this are long term capital gains, so they're taxed differently than your regular income. No you cannot trade it for shares of something else [0]. [0] - There are investment vehicles (exchange funds) that do this for publicly traded stocks. They're a good way of diversifying your portfolio if you're heavily weighted in one stock, but they typically keep that capital locked up for seven years which is not great if you value liquidity.
thundergolfer 3y ago
You don’t sell back to the company. Nasdaq and other exchanges have platforms for facilitating secondary market sales. You can’t trade it for something else, it’s a sale for cash. And no, it doesn’t come into your paycheck you nominate a bank account using the platform.
dilyevsky 3y ago
In my case (Cruise) I got offer once a quarter to liquidate any number of my vested RSUs at a price set by some third party assessor (roughly equal to last round’s valuation). If you sell the stock and get cash in your brokerage - amount needed to cover taxes. So basically like regular rsus except price is static More info (although I personally didn’t use cart for this): https://carta.com/blog/tender-offer-faq/# https://carta.com/blog/tender-offer-faq/#
guitarsteve 3y ago
My previous employer had a tender offer as part of a new funding round. I was an ex-employee already and had exercised my options within the 90 day window of resigning. If I remember correctly, we used Carta for both exercising the options and the tender offer. For the tender offer, the company set a deadline and a price per share. Current employees were limited to selling a certain % of their options/shares. The website enforced the same restriction for me, which seemed like a bug, but I didn’t plan on selling most of my shares anyway. I chose a number of shares in a web form, clicked a button, and got cash direct-deposited. I had a larger than usual tax bill but I paid it while handling my usual annual tax return. No penalty on the taxes due to the “safe harbor” rule.

rvz 3y ago

Accredited investors sign up to private market brokers such as EquityZen, Forge or FlexTrade to match sellers of company stock (typically employees) with buyers (mostly outside investors). Depending on market conditions there can be private fundraising through those marketplaces which employees are able to directly sell their existing shares if they want to. This also depends on the company as well to allow this.

ionwake 3y ago
Does anyone know if openAI shares are listen on equityzen or will be?
- sb8244 3y ago
  This is an uneducated opinion, but I'd be absolutely shocked if it's not a major investor that is buying effectively privately. Random people won't be able to get shares.
- ComputerGuru 3y ago
  It’s up to the individual employee.
longhaul 3y ago
Not FlexTrade, they are a trading systems ISV, not a private market broker

maratc 3y ago

In my case, I signed a part of my shares off and received an XL check (after paying XL taxes). That was a "take it or leave it" kind of deal, no platform was used.

sitkack 3y ago
So it was a buyback?
- maratc 3y ago
  To the best of my understanding, it wasn’t a “buyback” as the money came from the new investors and not from the company itself. The new owner of the options (or shares) that were previously mine is the new investor — and again, this is what I understand, it might or might not be the actual case. None of it is my business or of any interest to me, though.
- dilyevsky 3y ago
  Technical term is “tender offer”, not necessarily buyback - other investors can participate too
mistrial9 3y ago
long ago in some deals, you the junior person had to get the money to pay the tax on the transfer before you had a right to sell.. therefore, there was an intermediate step where the junior person might have to borrow money to complete the deal; failing borrowing, the junior person may not be able to take the compensation.
- yieldcrv 3y ago
  thats still common in less sophisticated startups and markets (they think they are sophisticated though, it just depends on which VCs gave them which legal counsel) but there are a lot of lenders for cashless exercise

toomuchtodo 3y ago

Assuming an outside investor vs a buyback, tender offers are usually done through a platform such as Nasdaq Private Market. Fees are usually much more reasonable vs through marketplaces. Funds are wired at closing. There’s usually a virtual data room available with financials you can share with an attorney and/or financial advisor. https://www.nasdaqprivatemarket.com/ https://www.nasdaqprivatemarket.com/

JumpCrisscross 3y ago
> Fees are usually much more reasonable vs through marketplaces Fees on tenders are much higher than in open-market trades, they’re just baked into the buy side. The handshake deal management does with tenders is underpricing the offering so managers can add fees on top. Where open-market transactions happen alongside tenders, at least on the institutional side, it’s not uncommon to see 20%+ premiums.
- toomuchtodo 3y ago
  What are your thoughts when transactions at open markets aren’t clearing above the tender offer price?
  - JumpCrisscross 3y ago
    > What are your thoughts when transactions at open markets aren’t clearing above the tender offer price? It signals a dysfunction. If before, information asymmetry. This, fortunately, corrected quickly. If during or after, company prospects may have changed since the tender was announced, or the company is restricting transfers to cronies. The latter is quite common, and a major profit centre for growth capital VCs.
    - toomuchtodo 3y ago
      Appreciate it.

realslimjd 3y ago

I've worked places that have used Carta for this. Sometimes the company buys the shares back, but I think the more common case is that it's new investors. You do get a check, but it's separate from your regular one. Sales like this are long term capital gains, so they're taxed differently than your regular income. No you cannot trade it for shares of something else [0]. [0] - There are investment vehicles (exchange funds) that do this for publicly traded stocks. They're a good way of diversifying your portfolio if you're heavily weighted in one stock, but they typically keep that capital locked up for seven years which is not great if you value liquidity.

thundergolfer 3y ago

You don’t sell back to the company. Nasdaq and other exchanges have platforms for facilitating secondary market sales. You can’t trade it for something else, it’s a sale for cash. And no, it doesn’t come into your paycheck you nominate a bank account using the platform.

dilyevsky 3y ago

In my case (Cruise) I got offer once a quarter to liquidate any number of my vested RSUs at a price set by some third party assessor (roughly equal to last round’s valuation). If you sell the stock and get cash in your brokerage - amount needed to cover taxes. So basically like regular rsus except price is static More info (although I personally didn’t use cart for this): https://carta.com/blog/tender-offer-faq/# https://carta.com/blog/tender-offer-faq/#

guitarsteve 3y ago

My previous employer had a tender offer as part of a new funding round. I was an ex-employee already and had exercised my options within the 90 day window of resigning. If I remember correctly, we used Carta for both exercising the options and the tender offer. For the tender offer, the company set a deadline and a price per share. Current employees were limited to selling a certain % of their options/shares. The website enforced the same restriction for me, which seemed like a bug, but I didn’t plan on selling most of my shares anyway. I chose a number of shares in a web form, clicked a button, and got cash direct-deposited. I had a larger than usual tax bill but I paid it while handling my usual annual tax return. No penalty on the taxes due to the “safe harbor” rule.