[rahimnathwani]

I can see two practical problems with this, and am curious about how they deal with them:

- The investors will not be entitled to the same information as stockholders, which will limit their ability to properly value the shares. This, in turn, should increase their risk perception and lower the price they offer.

- Even if the contract between the investor and the employee is sound, the employee could fail to deliver the stock for a number of reasons, including violating something in their employment agreement, or due to onerous provisions among the vesting terms. (Companies have been known to pull back securities which were already vested at the time the employee left.)

[bd_at_rivenhill]

Regarding the second point, failure to deliver is an insurable risk, and would probably spawn a related market in derivatives. Anyone trading the contract on the shares that the employee wishes to sell will probably go over the employment agreement and the corporate bylaws very carefully in order to assess this risk.

Under what conditions have employers been able to pull back shares that are already vested without being sued into oblivion?

[rahimnathwani]

Regarding the second point, failure to deliver is an insurable risk...assess this risk.

Yes, but whoever insures the risk would face the same difficulty in getting enough information to properly assess the risk. I'm not saying it's not doable. However, it might not be doable well enough, and cheaply enough, that there's enough margin of safety for the investor, above the lowest price at which the employee would be willing to 'sell'.

Under what conditions have employers been able to pull back shares that are already vested without being sued into oblivion?

Skype pulled back options that were already vested: http://finance.fortune.cnn.com/2011/06/24/skype-vesting_cont...

I'm not aware of any similar instance for vested shares.

[judk]

Look at how SharesPost and secondMarket have already solved the first problem.

He second problem is just a special case, one risk.

[rahimnathwani]

Look at how SharesPost and secondMarket have already solved the first problem.

They've solved it for more later-stage, pre-IPO companies. I'm not sure they've solved it for less well-understood companies which have raised Series A or B. I haven't looked deeply into this, so I'm prepared to stand corrected :)