There's no liquid market for Uber shares. The article further states that Uber has taken measures to prevent a secondary market from developing. I wonder what those measures are. I imagine it's straightforward to prevent someone who wants to keep working at Uber from doing a secondary sale, but what sorts of contract terms can Uber put in place to prevent someone from quitting and then selling on the secondary market?
Rights of first refusal are common, but how can Uber prevent a non-employee from selling? I'd love to see the language they use in their options agreements.
I assume that in my wife's case, the company was buying the shares back (privately held firm and we weren't dealing in a secondary market). I guess I'm just surprised Uber doesn't do the same (actually, I'm not, given their C-suite's history of being all-around dicks).
> I guess I'm just surprised Uber doesn't do the same (actually, I'm not, given their C-suite's history of being all-around dicks).
I've never heard of this in the valley, it's standard practice to not allow shares to be traded and provide no option for liquidity until IPO. There can be occasional secondary offerings (Facebook and Square had these) but they are usually a one time deal. Definitely not a concept that Uber invented.
My understanding is, right of first refusal includes the option to render the equity worthless if this right is not honored. It's a threat I've seen made before by a CEO who did not want a secondary market to exist.
Can you expand on that? How would one be able to render the equity worthless?
My best understanding of a typical "right of first refusal" clause is that it gives the company the right to match any offer by a third-party buyer.
This would add some friction to the transaction, in that the company could have some specified period to consider the offer, leaving the pending transaction with a third-party buyer in limbo (or discourage the third-party from even considering the transaction). But if the company refuses to buy back the stock at the terms of the third-party offer or the period of time for the company to consider the offer expires, then you could go ahead with the sale to the third-party.
Every right of first refusal clause I've ever been subjected to or subjected others to has had a thirty day deadline, so I don't think this is accurate. It's unlikely that the set of companies I worked for / founded was that unrepresentative.
Mind you, when I did do a sale on the secondary market, it always took the full thirty days for the company to approve.
Rights of first refusal are common, but how can Uber prevent a non-employee from selling? I'd love to see the language they use in their options agreements.