The Headache Of Share Trading For Facebook And Zynga

One of the hassles for start-ups prior to floating on the stock exchange is growing numbers of employees trading their shares to acquaintances. The big problem is the risk of the number of shareholders growing past 500, bringing the burden of additional financial reporting obligations.

One of the hassles for start-ups prior to floating on the stock exchange is growing numbers of employees trading their shares to acquaintances. The big problem is the risk of the number of shareholders growing past 500, bringing the burden of additional financial reporting obligations.

So it’s not surprising to learn that companies like Facebook and game developer Zynga are seeking to restrict the trade of shares, by imposing hefty administrative fees. Bloomberg reports that Facebook is charging $2,500 every time shares change hands, while Zynga is charging somewhere between $4,500 and $6,000. I’m surprised that Zynga is charging more than Facebook as I would have thought Facebook had more shareholders already and therefore a higher risk of exceeding the 500. Sources also suggest that Facebook has barred employees from selling shares until the company declares an open-trading period.

While I do understand the companies’ wish to keep a lid on how many shares are traded, I also understand employees’ desire to cash out. If I were an early Facebook employee, I might be more than a little frustrated about the difficulty of converting my paper wealth into something tangible that I can use to improve my life. Facebook was founded in 2004 and six years is a long time to go without an initial public offering or acquisition. Founder Mark Zuckerberg is going to have to loosen his control eventually.

Photo credit: New York Stock Exchange by BlatantNews on Flickr, licensed for commercial use under Creative Commons.