Zinger Key Points
- The 90- to 180-day period IPO lock up period has eased now, with several companies now allowing early sales of shares by insiders.
- Coinbase shareholders allege in a lawsuit the exchange allowed insiders to sell shares knowing it is going to miss quarterly targets.
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“The Black Swan” author Nassim Nicholas Taleb recently took to Twitter to slam insider selling by tech founders, labeling it “inverse skin the game.”
What Happened: “You get rich by selling a story and transfer the downside to suckers," Taleb tweeted late Wednesday.
He noted that many tech founders are upset with the criticism that insiders are cashing out upon the public debut of the companies. This is done by using a legal trick that allowed them to sell immediately, unlike standard IPOs, he added.
Taleb's comments came in light of a Semafor report that said a new shareholder lawsuit has been filed against Coinbase Global, Inc.'s COIN directors and executives, including Silicon Valley investors such as Marc Andreessen and Fred Wilson, and the crypto exchange's CEO Brian Armstrong and CFO Alesia Haas.
These investors and executives sold $2.9 billion worth of shares between the time the company made its public debut on April 14, 2021, and reported its quarterly results a month later, the plaintiffs said.
The lawsuit filed in Delaware court was unsealed on Monday. It alleges that Coinbase sold shares knowing very well that the exchange would miss its quarterly target.
See Also: How Does Coinbase Make Money
Why It's Important: A typical initial public offering has a 90- to 180-day lockup period during which founders, investors and employees are prohibited from selling shares to instill faith in the company.
The lockup restrictions have been loosened gradually and about one-quarter of IPOs in 2021 had provisions for allowing early lock-up releases, TechCrunch reported, citing data from IPO specialist Renaissance Capital.
The TechCrunch report pointed to Robinhood Markets, Inc. HOOD allowing employees to sell 15% of the shares immediately after the listing and another 15% a month after that.
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