Twitter’s move to allow longstanding employees to cash in some of their stock in a tightly controlled transaction is the latest sign of companies looking to avoid the fate of Facebook, which became a cautionary tale of what could go wrong when shares of fast-growing start-ups are traded openly on a pseudo-private market.
By maintaining a more modest valuation through an orderly $80m tender offer launched yesterday, Twitter is trying to prevent a repeat of the widespread secondary trading that inflated Facebook’s price ahead of its initial public offering last year, people familiar with the matter say.
In the years leading up to Facebook’s initial public offering, companies that facilitated secondary trading in unlisted start-ups, like SecondMarket and SharesPost, were heralded as the path for employees and early investors to cash out, in an era when the more promising start-ups often delayed their initial public offering for years.