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Facebook Manufactures Liquidity for Employees – Good Move August 4, 2008

Posted by John in Technology.
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Eric (on a roll) Eldon is reporting that Facebook is going to announce that it will let employees “cash out” at an internal valuation of $4b.  This amount is well under the valuation that Microsoft placed on the company.

Facebook has an internal valuation of $4 billion, as Venturebeat previously reported. It will begin letting current employees sell 20 percent of their fully vested stock options at that valuation, starting this fall.

Ok I think that Facebook’s engineering of an liquidity event for their employees is a good thing.  I’ve said on this blog that Microsoft’s run at buying Facebook was their IPO.

My sources inside Facebook and at Microsoft both admitted that employees at Facebook were getting restless given that an IPO is not in sight.   The opportunity for employees to sell some of their vested shares in this deal is great for employees and good for the company.

Comments»

1. Facebook to let employees sell some stock — at internal $4 billion valuation » VentureBeat - August 4, 2008

[…] dives into the numbers, here, and looks at how this move could impact employees. Valleywag and John Furrier, meanwhile, both mention other signs of this employee stock plan in the works. Tags: […]

2. Svetlana Gladkova - August 5, 2008

It is refreshing to see at least something more reasonable than the huge $15 billion finally but still I think that even this figure is kind of too high for this over-hyped social network.

3. gregorylent - August 5, 2008

how can one be rewarded with money for work at a company that has never made money? it is working the system, but no measure of human value. like bezos, cashing out before amazon had made a cent. it is taking money from investors, not creating actual value.

this mindset is at the root of much of america’s financial difficulty, don’t you think?

the home run mentality, managing for the next quarter’s results, it seems to lead to long-term trouble. why glorify it?

am i wrong?

4. John Furrier - August 5, 2008

Gregory,
I would argue that Facebook is already a home run. The employees deserve to cash out something given no market for their stock.

That being said homeruns are not likely in most cases. The bigger problem is lack of liquidity. That is troublesome for entrepreneurs and VCs.


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