The new “work from anywhere” employee benefit: liquidity
Back before it’s IPO, when Airbnb employees grew impatient for a payout, they openly pressured the company to go public. This tension led to eager investment firms and brokers seeking out former employees to offer cash loans for their stock once the company went public. After Visa’s deal to acquire Plaid fell through, former Plaid employees who were banking on a payout, were tempted by offers from private buyers interested in buying their shares at 4X the price Visa would have paid.
The increasing tension between fast-growing companies that want to stay private and their employees who are looking to cash in sooner than later on their equity is putting intense pressure on unicorn founders. While staying private longer can foster moonshot innovation, outside of the scrutiny of quarterly earnings reporting, it can also result in frustrated employees banking on cashing out equity to make big life decisions.
Meanwhile, the long list of office perks that had helped to keep startup employees happy and satisfied have been rendered irrelevant in an increasing and indefinite work-from-home world.
As the list of companies announcing that they will allow employees to work from home forever continues to grow, remote or flexible work itself is no longer even considered a “perk”. And then there are those perks once tied to the physical office--free lunch, beer on tap, gym access-- that are also quickly becoming a thing of the past. As the workplace has changed for the foreseeable future, employers have to find new ways to attract and retain talent and evolve stale workplace perks to compete.
So what are companies to do? And how do they balance the need to retain employees and keep them happy and satisfied, and still maintain control over their destinies? That’s where Forge comes in.
Private companies have an opportunity to give employees a perk appropriate for the work-from-home life, and one that they’ll truly value: the ability to cash out on some of their equity prior to an exit event. Unicorn companies are increasingly turning to the private markets to offer customized liquidity events to appease shareholders and stay private longer. The result is a win-win.
How it works:
Through Forge Company Solutions, unicorn companies can design and manage customized liquidity programs including executive liquidity, company-sponsored employee liquidity with cashless exercise, and direct listings, that ultimately incentivize and support employees and investors, raise capital, and provide insight into market-based pricing.
The company gets to maintain control of the offering, deciding how much equity employees can sell and when and, importantly, who is allowed to invest.
In addition to the seamless administrative function, Forge can bring its marketplace to bear for the benefit of equity holders, who can access a diverse investor pool and auction-based pricing that has the potential to put more money in employees’ pockets than perhaps a traditional tender offer might. (In traditional tenders, companies often agree to a set, discounted price for all participating shares, with one institution.)
Liquidity on Your Own Terms...
Company-sponsored liquidity can become an exciting event for employees. It helps motivate and retain existing employees, and is an attractive option for prospective employees. It helps current employees achieve goals and needs in their personal lives. And now, advances in technology and modern marketplaces are making it an attractive option for companies and founders.
Sounds too good to be true? Many companies have already found success leveraging the private markets in this way including Palantir, Spotify and Slack. A private company for 18 years, employees, executives and investors in Palantir, for example, sold hundreds of millions in equity prior to the company’s 2020 IPO. The benefits of that private market access meant the company could stay private until it was ready for the public markets. Investors got early access to the company before it was public. The company got market-based insight on its reference price. And employees got early liquidity as a reward for their contribution to the company’s success.
Liquidity may be the best benefit unicorns can give their employees.
PLEASE READ THESE IMPORTANT LEGAL NOTICES & DISCLOSURES
The information and material presented in this article is provided for your informational purposes only and does not constitute an offer by Forge Global, Inc. Forge Securities LLC or any of its affiliates (collectively, "Forge") to sell, or a solicitation of an offer to buy any securities and may not be used or relied upon in connection with any offer or sale of securities. An offer or solicitation can be made only through the delivery of final offering document(s) and purchase agreement and will be subject to the terms and conditions and risks delivered in such documents.
This article does not constitute an offer to provide investment advice or service. Registered representatives of Forge Securities LLC do not (1) advise any member on the merits or prudence of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax, or transactional advisory services. Securities referenced in this article may be offered by Forge Securities LLC, member FINRA/SIPC.
Forge Securities LLC is a wholly owned subsidiary of Forge Global, Inc. Certain affiliates may act as principals in such transactions.
Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative, involving a high degree of risk, and investors should be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.