Eliot Brown and Greg Bensinger reported earlier this week at The Wall Street Journal Online that, “To reap riches in Silicon Valley, entrepreneurs and venture investors typically had to wait until their startup was acquired or went public.
“Now, a third option is thriving—private sales of major stakes.
“Wealthy investment firms are snapping up stock in some of the most highly valued startups by buying positions from early shareholders. The deals, known as secondary sales, are allowing employees and investors to cash out of some stock while the companies avoid the public markets, bringing an injection of funds to many in Silicon Valley despite a dearth of tech IPOs.”
The Journal writers noted that, “Leading the way is Japanese conglomerate SoftBank Group Corp., which last week cleared a hurdle for a deal with Uber Technologies Inc. where SoftBank’s tech-focused investment fund would seek to buy shares from investors and employees at a discount to the ride-hailing firm’s $68 billion valuation. If successful, the investment, valued at as much as $10 billion, would be the largest such transaction in tech history.
“SoftBank also recently committed $1.3 billion to buy out investors and employees at shared-office space company WeWork Cos. as part of a $4.4 billion investment, according to people familiar with the matter. Shareholders were informed in September they could sell shares at the same $20 billion valuation that SoftBank paid to the company. Former WeWork employees say they received the money for their shares in recent weeks.”
The WSJ article added that, “The trend extends beyond the SoftBank deals to highly valued companies like Airbnb Inc., online lender Social Finance Inc. and messaging software company Slack Technologies Inc., according to people familiar with the sales.
“For years, there have been various markets for sales of secondary shares, generally aimed at helping employees and early investors take some cash out before an initial public offering. What has changed is the scale and frequency of the deals, with big transactions fueled by supersize valuations and easy access to funds amid low interest rates.”
