If you're a seller and you did not verify investor accreditation, you're opening yourself up to a lawsuit when things go bad with the investment - what if the buyer comes back and claims he was defrauded and duped into buying shaky securities?
The broker participating in such transaction, in theory, has a chance of having their license revoked due to participation in alleged fraud.
So, not necessarily just "wealthy" individuals.
You can instead have a high income (the $200k mentioned) and zero wealth. I suspect that many more people qualify as accredited under the income requirement than qualify under the asset requirement.
http://money.cnn.com/2014/03/14/news/economy/us-millionaires...
"Shaq is rich; the white man that signs his check is wealthy. Here you go Shaq, go buy yourself a bouncing car. Bling-Bling . . . . I ain’t talking bout Oprah, I’m talking about Bill Gates. OK!. If Bill Gates woke up tomorrow with Oprah’s money, he would jump out a …window. I’m not talking about rich, I’m talking about wealthy
- Chris Rock"
If he weren't a comedian, I'd say Chris Rock is so full of shit it's not even funny, but I guess they're two separate things (meaning that in this instance he's objectively full of shit, but that has nothing to do with him being subjectively not funny to me; there are other comedians who're just as full of shit, but I still find them funny.)
http://www.politifact.com/truth-o-meter/statements/2013/mar/...
But this is one of those words that should probably be set aside for the purposes of debate in favor of something more specific, because arguing over the definition of a term that doesn't actually have a standard definition isn't terribly productive.
In other words you can't sell except as part of a board approved sale of the company or a public offering. I think opportunities to buy are based on new issuance of stock (for accredited investors) not based on trades of existing stock.
Anyone know why / what triggers that? When is it typical for stock granted to employees to actually be resellable?
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.
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.
All reasons why managers might make life difficult for said employee after the fact.
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).
This is both to maintain control and to avoid having more than 500 shareholders, which triggers all kinds of additional regulations.
I _think_ the JOBS Act of 2012 increased this to 2000 instead of 500.
Wouldn't this be more reliable to do by keeping control via different classes of stock and or limiting the total size of the employee option pool to some significantly less percentage than the founders have? What's the most common/recommended size of the employee option pool (I want to say I've heard it is like 5-15% depending on the age of the company)?
It's not easy for an employee to get access to a secondary market anyway, but yes they should also be enforcing the transaction rules.