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Comment by alistairSH | Hacker News Reader

In the past, when my wife has had options, we've always been able to use cash from the exercise and immediate sale to fund the transaction, with no cash out of pocket. Is this not an option available to Uber employees?

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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.

There's no liquid market for Uber shares.

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.

It is a little different when the CEO is on record saying he has no interest in doing an IPO in the foreseeable future.

It seems this is the bad part of what Uber is doing, even though they have reasons for that

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.

There's almost never a timeliness clause in the right of first refusal (ROFS) section. They can simply choose to ignore your request...indefinitely.

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.

That seems like a pretty lame loophole. Is that the crux of the method for preventing secondary markets?

That may be standard, I'm not really sure, just remember everything is negotiable.

That depends on whether there is actually a market for Uber shares. In the few cases where I've had the ability to exercise options, the company was still entirely privately held and there was no general market for the shares. And nobody was really interested in buying mine, so there was nobody to sell to, even though on paper you could calculate a value.

That's an option if they're acquired or IPO. This is more about quitting and exercising before either of those events happen.

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