Facebook cashouts trigger mini gold rush

As gold rushes go, this one isn’t quite up to dot-com-boom status, but it seems change is afoot at Silicon Valley start-ups. In a recessionary world where IPOs are scarce and stock options are getting stale, a tech cubicle can get dark, quiet and lonely. There’s no confetti strewn about, no popping of champagne corks to be heard. And so, when some of these employees hear about how Facebook created a program that allowed its employees to cash out up to $1 million, or a quarter of their shares, they want a piece of the action.

Some might be shocked by this development, that Silicon Valley workers would want to get rich quickly. Some might even label them mercenaries. But even those of us who might think that Silicon Valley is a unique place where 80-hour workweeks will surely pay off someday know that times are tough. And those “Joe Facebooks” have, according to one blog post, girlfriends and student loans. In other words, cash is king, money still talks. When the short term turns into five years, the long term seems too far off, and all of a sudden the valley doesn’t seem so magical.

And so the market opens up for creative investment vehicles such as HPPOs, investment firms to buy shares directly from employees, and online exchanges such as SecondMarket, which helps find buyers for shares in private companies. Innovation lives! One might liken it to the development of a gold-recovery technique, akin to upgrading from a lowly pan. Because the tech industry has matured, the Web is out of beta and Silicon Valley has shown it isn’t immune to the downturn, it makes sense that workers would want to diversify. Stocks in an unproven company, sure. But startups are failing and even formerly successful companies are laying off. Liquidity is cushion.

Of course, Facebook’s IPO might be the biggest one ever, and “Joe Facebook” could come to regret his restlessness. But despite signs of life in valley venture capital, no record-shattering IPOs seem to be on the horizon. The mixed signals about an economic recovery suggest it will be slow. We can only hope it’s steady.


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  • AP

    Any word on what the pricing is on these employee stock sales? I am assuming that it is at a discount to the preferred shares that the institutions purchased recently.