
Attachment to highway bill would deregulate trading of startup employee shares - blondie9x
http://www.bloomberg.com/news/articles/2015-11-12/there-s-a-cash-windfall-for-tech-workers-buried-in-highway-bill
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Someone1234
Yay, let's tack on a bunch of controversial and useless junk onto a vital
transportation bill so it risks being voted against and or vetoed.

If these ideas were so great they would be able to stand on their own in their
own bill and be debated about. But instead, no, let's tack them onto military
budgets/transportation funding/education bills, you know, stuff that people
often won't vote against.

Most other countries frankly don't allow this. A bill or act has a single
theme and a single mandate. I don't understand why the US allows it, and it
screams of corruption/bribery/etc.

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_cudgel
> I don't understand why the US allows it, and it screams of
> corruption/bribery/etc.

Seems to me like you understand it completely. The US is, like most countries,
mired in a bit of corruption/bribery/etc. I am of the opinion this is simply
part of the human condition, and is virtually impossible to eliminate.

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jimrandomh
It didn't used to be this bad in the US, and there are many countries where it
isn't like this. Corruption needs to be fought against, not apologized for.

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llamamamama
I'm not sure when you think corruption began in the US, but I'm certain you're
naive and wrong.

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djb_hackernews
Read to the end for this gem: "Under Representative McHenry’s bill, purchases
would be restricted to investors who earn more than $200,000 a year or have a
net worth of $1 million."

Plus, I don't think founders will really like this as it will probably find a
different valuation than they thought they had, see snapchat.

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ChuckMcM
Per @twoodfin's comment that is just a qualified investor restriction on
_buying_ the shares. It is a good thing. Since employees are selling common
stock rather than preferred, they won't get the same price as the current
valuation anyway, but it could let them capture some of the value that is
going only to investors now. As I mentioned elsewhere the biggest losers in
this unicorn bubble are employees (and to a lesser extent founders) who won't
see any value for their common stock in a wind down of a former unicorn.
Having the ability to cash in when the market is irrational (assuming they do)
would give them an out.

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djb_hackernews
Right, this is restricting the sale to only qualified investors which
essentially means any employee can force a new investment round (what will we
call them? employee rounds? mini rounds?) where all proceeds go directly to
the employee.

My hunch is founders will find a way to block such sales not only to avoid the
surprises in new valuations but also the headache of managing that.

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ChuckMcM
When I read it, it felt more like it was putting structure around for what
already existed in the form of Second Market (which NASDAQ recently bought).
Second Market was where FB employees were selling their stock before FB went
public, and caused the stock valuation to settle on what would essentially be
the public offering price.

Given the different share rights of preferred and common stock in a pre-IPO
company, selling common shares does not look anything at all like an
"investment round" in the typical sense. It does however impact the 409a
valuation and could cause new employees to get a higher strike price on their
options when they join.

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djb_hackernews
To be honest I didn't read the legislation. The interesting thing about FB and
SecondMarket is FB agreed to allow that and probably approved each and every
sale. Since this system already works I can only imagine the legislation will
make it either compulsory or painful to avoid.

The other interesting thing is the FB/SecondMarket situation did actually look
like an investment round in the way that it set a share price and valuation.
From what I remember SecondMarket set up weekly auctions for FB shares right
up until the IPO and guess what the IPO did? Closed at the open.

There is no way to tell but I bet if the SecondMarket sales hadn't happened it
would have done what most hot tech IPOs do, set an artificially low IPO price
and cash in on the pop.

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not_that_noob
Anyone with more perspective care to provide more details? I thought employees
were always able to sell their non-public shares as long as the company
consented. So I'm not clear why this bill would be a windfall when compared to
the status quo.

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jkot
Happens everywhere. My favorite is when EU Commission smugled software patents
into fishery regulation law.

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cft
I wonder if this is actually required for the private equity bubble to pop.

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tlrobinson
Could we get a less link-baity title?

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alexpw
I read this as tech workers who choose to be buried under the highway "Bill"
road will be paid mightily.

Deeply disappointed when I clicked.

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jinst8gmi
Made my day.

