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Secondary shops flooded with unicorn sellers

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Re: Secondary shops flooded with unicorn sellers

#31

Post by dpflan »

throw2192015 wrote: post #15
dpflan wrote: post #4

Has any HNer participated in such a secondary sale? I think it could be informative to describe the experience, whom you dealt with, how a price was agreed upon, how your company discussed secondary sales, etc.

I have participated as a seller. I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal. I filled out some paperwork and sent proof that I was…

Thanks for sharing this. The process does sound straight forward. It seems that you still retained some shares. Did you exercise with the intention of selling a portion on the secondary market?

Re: Secondary shops flooded with unicorn sellers

#32

Post by jessedhillon »

sharkweek wrote: post #22

>“In tech, when times are good, it’s about potential. When they aren’t, investors focus much more on fundamentals.” That second part... why that isn't ALWAYS the focus is beyond me. Edit: Adding a clarifying statement as my point wasn't specific enough. I'm very aware that early stage investments are VERY speculative, but when we're talking about a company moving into 1BN+ valuation territory, fundamentals should be…

Why does this simplistic analysis permeate HN, of all places?

There are certain technologies and trends whose full potential is not presently obvious, or realizable, and the ability to exercise that potential could be capped or cut short if investors force a near-term focus on profits. It's the same reason why we ideally teach children any number of skills which have no direct application to their future vocations. Future options are sometimes more desirable than current profits.

Re: Secondary shops flooded with unicorn sellers

#33

Post by shostack »

danjayh wrote: post #23

I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's…

Do you have data to support that a few unicorn valuations being corrected will spread to the rest of the economy, particularly housing and not just be largely limited to private markets and investors?

Re: Secondary shops flooded with unicorn sellers

#34

Post by thwarted »

dhj wrote: post #8
mmanfrin wrote: post #2

Semi related question: One has to be an accredited (i.e. wealthy) investor to invest in startups, but this does not apply to employees exercising options. Does that mean that employees who do not meet the wealth requirements to be accredited are only ever able to sell ownership, and only to accredited investors?

If the company is private then employees exercising options generally (always?) have clauses that restrict them from selling that stock whether they are accredited investors or not. Not a lawyer, but I think there may be two reasons: 1) prevent covert takeover from the original founders 2) prevent a general market for private companies (before IPO). IPO involves a lot of regulatory overhead to confirm full disclosure…

1) prevent covert takeover from the original founders

Wouldn't this be more reliable to do by keeping control via different classes of stock and or limiting the total size of the employee option pool to some significantly less percentage than the founders have? What's the most common/recommended size of the employee option pool (I want to say I've heard it is like 5-15% depending on the age of the company)?

Re: Secondary shops flooded with unicorn sellers

#35

Post by jessedhillon »

dkarapetyan wrote: post #28
rhc2104 wrote: post #24

Earlier quoted context omitted.

As a counterexample, Google didn't show ads until 2000. http://googlepress.blogspot.com/2000/10/google-launches-self...

But the fundamentals were not ads. It was solid search. That's what delivered value to users and why they kept coming back.

you are confusing business and technology fundamentals.

Business fundamentals -- bottom-line numbers on the P&L statement -- are not furthered by increasing the number of active users alone, or by delighting users. Only ad revenue would increase the fundamentals being discussed here.

Re: Secondary shops flooded with unicorn sellers

#36

Post by shostack »

throw2192015 wrote: post #15
dpflan wrote: post #4

Has any HNer participated in such a secondary sale? I think it could be informative to describe the experience, whom you dealt with, how a price was agreed upon, how your company discussed secondary sales, etc.

I have participated as a seller. I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal. I filled out some paperwork and sent proof that I was…

How did things work out from a tax perspective if you don't mind my asking? Also, what sort of communication did you have with your company before/during this transaction regarding it?

Is this the kind of thing employers might freak out about if they are blindsided by the request?

Re: Secondary shops flooded with unicorn sellers

#37

Post by throw2192015 »

dpflan wrote: post #31
throw2192015 wrote: post #15

Earlier quoted context omitted.

I have participated as a seller. I offered some of my exercised options for sale on SharesPost [1]. The SharesPost representative contacted me; she said that she had a potential buyer interested, but the bid was slightly lower than my initial ask and the volume they wanted to buy was a little lower than what I had offered to sell initially. We agreed on the deal. I filled out some paperwork and sent proof that I was…

Thanks for sharing this. The process does sound straight forward. It seems that you still retained some shares. Did you exercise with the intention of selling a portion on the secondary market?

I used some of my savings and a cash bonus I got at work to exercise some of my options. I held on to that stock for a year. The next year I sold a portion of that stock in the transaction described above. I used the proceeds from the sale to replenish my savings, which had taken a small hit due to the AMT from the previous tax year.

Re: Secondary shops flooded with unicorn sellers

#38

Post by shostack »

mavelikara wrote: post #18
shimon wrote: post #13

Earlier quoted context omitted.

I too assumed this limitation was widespread. But if unicorns are high-valued private companies, and there is a secondary market for their stock, then surely some holders are not restricted this way. Anyone know why / what triggers that? When is it typical for stock granted to employees to actually be resellable?

Depends on the terms under which the employee is issued stock. From a 2014 article[1]: Two months ago, an early Uber employee thought that he had found a buyer for his vested stock, at $200 per share. But when his agent tried to seal the deal, Uber refused to sign off on the transfer. Instead, it offered to buy back the shares for around $135 a piece, which is within the same price range that Google Ventures and TPG…

Really interesting, thanks for sharing.

Does this generally piss off the employer? I wonder if the employee faced any sort of retaliation or anything from this.

Re: Secondary shops flooded with unicorn sellers

#39

Post by sawthat »

danjayh wrote: post #23

I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's…

I predict, that in the future, there will be a recession. Also, at some point, an economic boom. Feel free to quote me on that.

I am unable to give exact dates, but there is a 25% chance that it will begin in the spring (what year, I cannot say)

Re: Secondary shops flooded with unicorn sellers

#40

Post by danjayh »

shostack wrote: post #33
danjayh wrote: post #23

I think that this is just the beginning. In my opinion, we're heading for a tech bust that's going to spread to the rest of the economy, and deflate additional bubbles (housing, for one). The government has been pushing cheap money for the better part of a decade in the name of creating the appearance of a 'recovery', but what they've really done is build a new house of cards. Make no mistake: the 'free' money that's…

Do you have data to support that a few unicorn valuations being corrected will spread to the rest of the economy, particularly housing and not just be largely limited to private markets and investors?

Yes and no. With regard to spreading, just prior observation that adjustments tend to spread. With regard to housing, the observation that the median home price : median income ratio is now above 5.2x, while at the last peak it was only at ~5x. The rate of growth is lower this time, but I don't think it matters because the ratio is still really bad.

http://politicalcalculations.blogspot.com/2015/04/the-curren...

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