More Facebook Stock Sale Details Revealed

On Monday it was reported that Facebook employees could start selling shares. Today, BusinessWeek is reporting more details on the transactions taking place. Among the employees that are selling shares are Mark Zuckerberg and Matt Cohler, the most recent executive to leave the fast growing social network. As previously reported the valuation that these shares are being sold at range from $3.75 to $5 billion.

It has now become a favorite past-time of technology bloggers and journalists to discuss who at Facebook is selling shares and for how much. The rumors have been buzzing for months and slowly more details have begun to emerge. According to BusinessWeek, employees are being limited in the amount that they can sell shares for. As Eric Eldon points out, “If buyers prove willing to pay more than the official internal valuation, then Facebook may have to re-value itself higher.”

While this doesn’t necessarily spell trouble for Facebook, a continuing trend of early employees selling shares before an official liquidation event sets a bad precedent. As Eric Hippeau of SoftBank Capital says in a statement in the BusinessWeek article, “I would have a concern. Am I facilitating people leaving the company the company to start their own business?” Letting people exit early only works at the hottest start-ups but for smaller start-ups this doesn’t make much sense.

Much of the value of a company is in its team and if employees begin to think that they can simply cash out, it doesn’t bode well at the time of a liquidity event. Then again, most liquidity events result in a large team of employees leaving the company so maybe it is better to let employees exit early on. Do you think letting employees sell their shares makes much sense?