[shimon]

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?

[mavelikara]

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 Capital had paid to invest in Uber the previous July. Take it or
    hold it.

    The employee also learned that Uber had amended its bylaws more than a year
    earlier, in order to restrict unapproved secondary sales. It was unclear if the
    bylaw change actually applied to shareholders who had not been party to the vote —
    lawyers seem to disagree on this point of Delaware law — but Uber threatened
    litigation if he tried to proceed. So he held. The financial and reputational
    hassles of a lawsuit would have just been too much, even if he had won.

[1]: http://fortune.com/2014/06/20/uber-plays-hardball-with-early...

[Eridrus]

The ability for a company to force you to take a lower price is new to me. Besides Uber, has anyone heard of this happening elsewhere?

[shostack]

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.

[mavelikara]

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

No, it should not piss off any employer!

The equity that is offered to you to as part of your employment is remuneration for your efforts. The employer should not be upset at you for wanting to convert that to cash. It is true that the employer might not want their stock to go to outside parties. In that case, they should arrange for alternate arrangements (buybacks, employee-liquidity in funding rounds etc). But you are not doing anything inherently unethical to warrant any retaliation.

[djhn]

I completely agree with you, but this isn't mutually exclusive with facing retaliation (in terms of internal politics, for instance.)

[shostack]

That's more to the point I was getting at. There's the legal situation, and then the political one. Selling shares in a private company could raise some red flags from management thinking an employee wants to cash out and bail, management worried about the perception of the company's health (internally and externally), management concerns about loss of control, etc.

All reasons why managers might make life difficult for said employee after the fact.

[prostoalex]

They generally don't want their cap table to explode with randos, and if there's access to sensitive information, they obviously don't want the cases where unscrupulous party buys shares just to feed that data to competitors.

With that said, it's obviously in their interest to provide some liquidity to avoid their long-time employees from defecting to GOOG or NFLX or FB, which reward with perfectly liquid stock grants, so in case of demand from the buy-side an employer would orchestrate a secondary market transaction. On the buy side in most cases you'd see an SPV managed by the VC who invested in previous rounds (which helps with keeping the cap table low).

Ironically, for smaller VCs entire economics of their firms are based on these SPVs (which sometimes charge upwards of 2% management fee on top of 20% carry - and that's for a chunk shares sitting quietly doing nothing).