First, a little framing might be helpful.
Within the context of the two use cases you cited, there are a number of factors that a company will encounter when allowing employee liquidity via selling a portion of their vested incentive stock options—shareholder inclusion, disclosure rules, 409A valuation, business tax, associated legal and compliance coverage, personal tax and wealth planning. The employee-wide tenders allow the company much greater control but much more to manage. One-offs are arm’s length with very little burden on the company, except facilitating stock transfers.
The direct secondary market was initially very institutional. Just a couple of funds were buying out the individual blocks of founders, departed employees or tired VCs. Around the advent of LinkedIn and Facebook and Twitter, one-off transactions grew dramatically and, by many accounts, created a lot of chaos for those companies.
They faced challenges around disclosure issues, impacts on 409A valuation, and the work involved with processing transactions. Consequently, you saw a lot of companies start to clamp down on these types of one-off transactions via transfer restrictions (found in company bylaws), company and investor rights of first refusal (ROFRs) and employee agreements that contained prohibitions on the pledging of shares (which pertains to loan-style transactions).
At the same time, those early “wild west” moments also spurred private tender offers where a company could put in place certain controls on employee liquidity that aligned interests between the seller, company and the board. They could define who gets to participate, limit how much each could sell, manage information disclosures, and more predictably forecast the 409A and taxation impacts.
We’ve been seeing a little bit of movement lately, the proverbial pendulum swinging back, where companies are saying, “Hey, these tenders are actually a fair amount of work themselves.” Yet, the needs of founders and employees, sometimes older investors, are not going away. Subsequently, Nasdaq Private Market is now providing solutions for companies that want to facilitate one-offs more efficiently, while still maintaining control of their process.