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The trend is against all three of these, but it's a slow trend. On #1 - the issue is individual employees each have shares tied to their hire date. It's possi

The trend is against all three of these, but it's a slow trend. On #1 - the issue is individual employees each have shares tied to their hire date. It's possible that someone could do some kind of financial engineering to make it look like 1, but this hasn't been done yet. This is the issue that forced Facebook to go public. On #2 - If it's a cash purchase, the problem is less an issue. It gets tricky when the acquirer is significantly away from a funding event. The values of many high tech firms can be +500% or -80% just 6 months after a prior event. This has a massive impact on share-based acquisitions. Less of an issue with more mature companies. All this said, it's fairly easy to see a world 20 years from now where there are much fewer public firms.

entee 11y ago
My guess is for these things to change (if they ever do) there would have to be a crisis event. Maybe after the next crash employees will be more reticent to take pure stock and will go for an alternate arrangement. Maybe the structures built for those arrangements will allow contracts for acquisitions to be structured differently. It's going to be interesting to see how long this private valuation explosion will last and what the fallout will be after it pops.
- mathattack 11y ago
  A fully private market isn't great either. There's a lot of value for the investment community in general to know what the daily value of a given stock is. If you try to get this transparency via off-market transactions, aren't you just recreating the public market?
  - entee 11y ago
    Oh totally. I think it would be a bad thing overall, but that doesn't mean it won't happen. If you have enough capital in a relatively small number of private entities, perhaps they will find it to their advantage to compromise a little on clarity, in exchange for more control or less regulation. Overall, I suspect a shadow market would be a bad thing, but it's hard to argue that for the moment there isn't something like a shadow market in silicon valley. I don't think it's a sustainable one, and it certainly is opaque (what's in those term sheets?), I'm just thinking of whether something similar could exist in a more permanent form.
philsnow 11y ago
> This is the issue that forced Facebook to go public. I thought they had to go public not because of how many employee shareholders they had, but because of how many employees had sold shares on secondary markets.

entee 11y ago

My guess is for these things to change (if they ever do) there would have to be a crisis event. Maybe after the next crash employees will be more reticent to take pure stock and will go for an alternate arrangement. Maybe the structures built for those arrangements will allow contracts for acquisitions to be structured differently. It's going to be interesting to see how long this private valuation explosion will last and what the fallout will be after it pops.

mathattack 11y ago
A fully private market isn't great either. There's a lot of value for the investment community in general to know what the daily value of a given stock is. If you try to get this transparency via off-market transactions, aren't you just recreating the public market?
- entee 11y ago
  Oh totally. I think it would be a bad thing overall, but that doesn't mean it won't happen. If you have enough capital in a relatively small number of private entities, perhaps they will find it to their advantage to compromise a little on clarity, in exchange for more control or less regulation. Overall, I suspect a shadow market would be a bad thing, but it's hard to argue that for the moment there isn't something like a shadow market in silicon valley. I don't think it's a sustainable one, and it certainly is opaque (what's in those term sheets?), I'm just thinking of whether something similar could exist in a more permanent form.

philsnow 11y ago

> This is the issue that forced Facebook to go public. I thought they had to go public not because of how many employee shareholders they had, but because of how many employees had sold shares on secondary markets.