Russian investment firm Digital Sky Technologies will buy $100 million in Facebook stocks from the company’s employees, Facebook announced today. Most casual Facebook users will probably look at that news and shrug. Why should we care?
The news is interesting for two reasons. First, for pure sport. In the long term, though, this could be an announcement that unleashes a wave of innovation across the web over the next few years.
The Sport of Employee Stock Sales
Today’s news is fun from a purely voyeuristic perspective. Facebook employees have twenty business days to make a decision: will they hold on to all the stock in the company they were granted when they were hired, hoping that it will become even more valuable in the future? Or will they take at least some money off the table now and gamble that they won’t regret it later? Some will no doubt sell all the stock they own and leave the company.
How much confidence do Facebook employees have in the future of the company and its ability to make money? As one of the biggest employers of the Web 2.0 era, Facebook could be the bubble that breaks hearts like all those big companies ten years ago – filled with paper millionaires, some of whom didn’t get out in time before everything was shown to be financially worthless. Or it could be the paradigm buster that proves things are really different today, that near universal reach online can be turned into profit.
Things are changing drastically at Facebook, the company is intent on pushing more communication between users into the light of public visibility. That may be the path to greater profitability or it may cause an implosion and mass exodus. This stock sale comes at a key turning point in Facebook’s history.
There’s a group of young people in Palo Alto that now have to decide whether to pull the trigger or to hold their cards for later. VentureBeat’s Eric Eldon, who watches the business of Facebook closely, says to employees don’t do it! Many friends, family and more cynical press will surely argue that employees should sell their stock while they’ve got the chance. What would you do? It’s fun to think about from that perspective.
Escaping the Golden Handcuffs
It’s not an acquisition by an even bigger company, but the availability of $100 million for employee stocks is likely to make at least a few Facebook employees rich and feeling footloose. Some will no doubt leave the company and found new internet startups.
Facebook employs many of the brightest innovators in social media and the prospect of those people starting new social networks, new communication technologies and new social media services is an exciting one. Many of them no doubt have lots of pent up ideas, but have felt trapped at Facebook because they’ve been waiting for their stock to be worth something and in demand. (The rest of the industry’s gain in innovation may be Facebook’s loss, too.)
We may not see a “Facebook Mafia” yet the way Silicon Valley saw PayPal alumni spread out and start or invest in companies like YouTube, LinkedIn, Yelp and others – but this could be a smaller version of the same dynamic. It could also be a small enough pile of money that the real Facebook Mafia either will or will not emerge later when a bigger windfall comes employees’ way.
Those are the two angles of interest that we see in what’s otherwise just two company’s business announcement.
