The fact that employees are willing to cash out now might mean that they are less confident about the potential of cashing out big in the future. I'm sure no early Google employee would even think of cashing out pre-IPO.
The fact that employees are willing to cash out now might mean that they are less confident about the potential of cashing out big in the future.
It might. Or it might just mean that some employees want to buy houses, new cars, etc.
People are very good at "doing without" when they're starting a new company, but there's a point where life catches up and they want to start living in a bit of comfort. This goes double (or more) for those people who have families -- I'm not sure quite how one would explain to a 3 year old that they're not getting the toys they want because daddy wants to hold on to his stock options so that he can become a millionaire when facebook IPOs a few years from now.
For instance, if I could stop working tomorrow, and maintain my current lifestyle, I would take that over promises of more cash later. I might do this even if the payout were not enough for me to fully retire on.
As long as I can take an ~5 yr sabbatical with no strings attached, I'm confident I can create enough things to keep the money coming in, on my own terms.
If employee Smith can get a payout of $1m now versus keeping a chance of getting $5m a couple of years from now, he might pick the $1m and leave. Facebook can probably hire someone else at the same salary and give them far fewer options because Facebook is seen as a far safer bet now than when Smith joined. The result is that the rest of Facebooks shareholders potentially win a lot of money.
How many share holders total does Facebook have now? My gut reaction to hearing this was that perhaps they were nearing the limit where they would be forced to go public and that this might be a stop-gap so that they can time their IPO more conveniently.
No company if forced to "go public" by trading on a public exchange. But the Securities & Exchange Act of 1934 requires public disclosure of some financials after a company accumulates 500 shareholders and $10 million in assets.
The SEC granted Facebook an exception in November 2008 because many of the shareholders hold restricted stock. Read more below:
Based on the statement in the article that Facebook's common stock sale program allows employees to "sell up to 20% of their common share holdings", I don't think this is about reducing the number of shareholders. They'd need to allow employees to sell all of their shares if they wanted to reduce the number of shareholders.
But it’s another sign that large private companies like Facebook are desperately seeking ways to find “liquidity” for their employees — especially now that the IPO market remains difficult, in particular for unprofitable companies.
