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How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

wsj.com

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Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#71

Post by dlubarov »

SeoxyS wrote: post #64
dlubarov wrote: post #48

Earlier quoted context omitted.

I don't know how legally sound it is, but the article quotes Kenneth saying "You’re not selling the shares, so the right of first refusal doesn’t apply".

Hey, I'm the Kenneth quoted. The quote was taken out of context, but what I was referring to is that in this scenario, you're trading a derivative and not the actual share. You're entering into a private contract with the buyer where, in exchange for a set amount of money, you're obligated to hold on to X shares of the stock, to liquidate the position as soon as legally possible during an IPO or acquisition, and to g…

I understand how the deal is structured, but selling your interest in some shares seems only superficially different from selling the shares directly. Perhaps the employer could argue that you're effectively selling shares and the ROFR clause applies?

I don't know, just speculating. Might not matter in practice if the employer doesn't have that much interest in exercising their ROFR anyway.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#72

Post by themagician »

gfodor wrote: post #60
refurb wrote: post #53

Earlier quoted context omitted.

I'm not saying an advantage isn't given to the wealthy, I'm just challenging the idea that that was the driver for the regulation. To be honest, the gov't is kind of stuck here. Let people make their own choices and they blame someone else. "I didn't know the mortgage rate was only a teaser!!" At least with the credited investor regulations, if they lose money, nobody has sympathy for them.

Seriously, the same people who complain about "accredited investors" being a privilege of the 1% are also going to use the phrase "predatory lenders." So, which is it? Can people be tricked into bad deals or can't they? I'm pretty sure if anyone could invest in private equity, overnight you'd see a flood of get-rich-quick ventures crop up and you'd see a lot of people lose everything. I'm not sure if I think the curr…

No more risk than penny stocks, options or other derivatives. Or existing "get rich quick" schemes.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#73

Post by fuckyoujacques »

dang wrote: post #50
mattmanser wrote: post #35

Why are you hiding behind an anon account to post this?

This was in reply to https://news.ycombinator.com/item?id=9299916 , but we've detached it as off-topic.

just kill the whole thing. it's matt answer and jacquesm being trollish assholes. it has no value, not even at the bottom of the page.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#74

Post by tsotha »

gfodor wrote: post #62
paul wrote: post #61

Earlier quoted context omitted.

Yeah, I'm not convinced that's a good idea, but I think they are at least putting some extra limits in place so that they won't gamble their whole 401k away.

They say Americans learn about geography though war -- I'm going to say they learn about economics through financial crises. Most people don't understand private equity markets (like they didn't understand CDS's, etc) so it's certainly in the list of contenders for the next crisis.

Even professionals in the industry don't understand CDS's. Some of them are deliberately complicated.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#75

Post by gyardley »

corford wrote: post #69
npkarnik wrote: post #7

Earlier quoted context omitted.

In some cases maybe, but hopefully most founders who obtain some personal liquidity in later rounds are not sadistic/hypocritical enough to deny their employees the same opportunity. But you're right, one potential large risk is a Chris Sacca -like situation, where one investor/investment group uses many anonymous buying agents to acquire a huge stake in a takeout/IPO candidate, via secondary liquidity. That can mess…

Based on a comment further up, my understanding is people buying on the secondary markets are not actually buying the shares. They're just offering $X to an employee now in return for being entitled to the full sale price of that employee's shares ($Y) immediately after IPO. $Y could be higher or lower than $X (that's the agents risk) but at no time does the agent actually own the shares.

People buying on secondary markets often directly buy shares. They only resort to derivatives when they're unable to buy directly due to stock restrictions.

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#76

Post by tsotha »

Domenic_S wrote: post #28
themagician wrote: post #23

Earlier quoted context omitted.

That analogy isn't about odds. It's about the why. The reason we don't let 99% of people buy shares of private companies has NOTHING to do with protecting the wealth of the 99%. Nothing. Zero. And to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. It has everything to do with creating a private market where the 1% can g…

> to pretend like people with less than a million dollars in liquid assets are "too dumb" or "inexperienced" to purchase something is beyond insulting. Really? Because a lot of that group said they "didn't know any better" and were "misled" when it came to bad mortgages during the crunch. Whether you believe them or not, that was their argument and it worked. There are entire industries based on exploiting people wit…

>Because a lot of that group said they "didn't know any better" and were "misled" when it came to bad mortgages during the crunch.

What else are you going to tell people when you lose half a mil? That sounds a lot better than "Honey, I gambled our financial future trying to get rich in the housing market, and you'll never believe what happened..."

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#77

Post by 9297230 »

sohailprasad wrote: post #12

I'm the CEO of Equidate, one of the companies profiled in this article. The article raises excellent points on the pitfalls of trading pre-IPO stock on secondary markets. The opportunity is risky to be sure, only for educated investors as ready and able to lose money as to make money. Information is limited and protections are only as good as the integrity of the participants. That puts a premium on honestly, transpa…

BTW, you have a couple typos in your website copy: "All you have do do is list you shares, prove your ownership"

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#78

Post by aluhut »

sohailprasad wrote: post #12

I'm the CEO of Equidate, one of the companies profiled in this article. The article raises excellent points on the pitfalls of trading pre-IPO stock on secondary markets. The opportunity is risky to be sure, only for educated investors as ready and able to lose money as to make money. Information is limited and protections are only as good as the integrity of the participants. That puts a premium on honestly, transpa…

"If they have liquidity they can start something new — perhaps a cure to disease, a new media company, or one that launches rocket ships."

Just out of interest: do anybody buy this bullshit today? Do you talk like this in public?

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#79

Post by corford »

gyardley wrote: post #75
corford wrote: post #69

Earlier quoted context omitted.

Based on a comment further up, my understanding is people buying on the secondary markets are not actually buying the shares. They're just offering $X to an employee now in return for being entitled to the full sale price of that employee's shares ($Y) immediately after IPO. $Y could be higher or lower than $X (that's the agents risk) but at no time does the agent actually own the shares.

People buying on secondary markets often directly buy shares. They only resort to derivatives when they're unable to buy directly due to stock restrictions.

Aren't most pre-IPO shares restricted though (company has ROFR, company board can block sale of shares to a third party they don't like etc.)?

Re: How Wall Street Middlemen Help Silicon Valley Employees Cash in Early

#80

Post by gyardley »

corford wrote: post #79
gyardley wrote: post #75

Earlier quoted context omitted.

People buying on secondary markets often directly buy shares. They only resort to derivatives when they're unable to buy directly due to stock restrictions.

Aren't most pre-IPO shares restricted though (company has ROFR, company board can block sale of shares to a third party they don't like etc.)?

Yes, but the type of restriction matters. Sometimes it's just a ROFR at the same price, and that alone isn't enough to deter either buyers or sellers from directly buying and selling.
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