Facebook employees just got a new way to cash in on their stock options.
Will it cause a talent drain?
Justin Fishner-Wolfson, a guy who used to work with Facebook investor Peter Thiel at the Founders’ Fund, is launching a new fund – called 137 Ventures – that will help Facebook employees borrow enough money to exercise their options and buy Facebook stock now.
Once these employees own their stock, they’ll be able to sell it at much higher prices on secondary markets.
So, what’s the catch?
VentureWire’s Tomio Geron reports 137 Ventures will charge Facebook employees (and employees at other hot startups such as LinkedIn) 12% interest plus 10% of their stock.
That’s a pretty hefty price to pay, but maybe some long-time Facebook employees are tired of sitting around waiting for Mark Zuckerberg to make their stock liquid on the public markets.
If that’s the case, the WSJ’s Scott Austin wonders if it’ll cause an exodus of Facebook employees:
What’s interesting is that the fund may encourage a number of employees to leave Facebook. The stock options expire 90 days after an employee departs the company, but most employees can’t afford to exercise the options on their own. With this fund, they can head out and cash out – and perhaps buy that beach house they had their eyes on.
(It’s probably also worth pointing out that starting about a year or so ago, Facebook stopped handing out traditional stock options and starting giving employees restricted stock units that can’t be sold under any circumstances.)