14 DAY TRIAL // Being an early employee in a hot startup can end up making you a small fortune from the stock options. But until those companies file for an IPO, those shares don't amount to very much unless you find a way to sell them.
And now, it's getting increasingly harder for those with shares in companies such as Facebook, Twitter and Zynga, arguably some of the hottest startups in Silicon Valley, to convert them into cash.
According to a report from Bloomberg Facebook is charging a $2,500 fee for each transaction. A different report is claiming that Twitter is charging $2,500 as well.
Zynga, the social gaming company which has seen a lot of growth and attention in the past year, used to ask for $4,500 and has recently hiked the price up to $6,000.
Share transactions from these companies are already restricted and dictated by the companies themselves. The shares are sold in so-called secondary markets and generally only to "accredited investors," people who are worth more than $1 million or have an income above $200,000 per year.
Even so, the companies usually prefer to sell to those who already have stock or to current employees. The sellers are equally restricted, regularly just former employees are allowed to dispose of their stock options.
All of this is possible because the companies themselves are the ones handling the transactions, not a stock market, so everyone has to play by their rules.
However, keeping track of all these transactions can prove time consuming and expensive for popular companies like Facebook, Twitter or Zynga which is why the transaction fees have been imposed.
The added benefit is that the fees limit transactions, something all of the companies want. The reason is simple, if a company has over 500 share-holders, it has to disclose certain aspects of the business, under US law, which most companies want to avoid until they are traded publicly.