Employee share buyback program

  • SoftBank-backed e-commerce company Fabric has announced an employee stock buyback program.
  • Ten days later, the company withdrew the offer, citing “unpredictable market conditions”.
  • The company has raised $293.5 million since 2020, most recently at a valuation of $1.5 billion.

On May 15, the $1.5 billion startup Fabric announced an internal program to help eligible employees sell some of their private equity in the company. This type of program, known in the industry as a tender offer, is a common way for startups to allow their employees to cash in some of their acquired capital – an opportunity for a big salary that rarely happens unless a startup goes public or is acquired. .

“As a private company, there are only certain situations in which options, exercised to become Fabric shares, can be liquidated. However, I am announcing today a temporary “tender offer” which will begin next week and will allow some of our permanent Fabric employees to choose to sell a portion of their vested options for cash,” read the company-wide email announcing the program, sent by Krupa Shah, Fabric’s general counsel.

Any employee who had been there for 12 months or more would be eligible, the email explained. Ten days later, the takeover bid was abruptly scuttled before it had even begun.

“Given the unpredictable market conditions, we are currently unable to complete our planned tender offer and are unable to provide a date to which it may be postponed,” Shah wrote in an email. -mail, viewed by Insider, dated May 25.

“As you may have seen and read, global macroeconomic issues along with cautious attitudes toward the tech sector as a whole make a takeover bid impractical or practical for us at this time,” he said. writes Shah. “The best thing we can do right now is to continue to achieve our goals and continue to grow as a company.”

“We were delighted to offer all employees with vested options, regardless of level, the opportunity to participate in this


liquidity

but unfortunately it didn’t work out due to market conditions, which reflect the global economy, not the fabric,” company spokesman Craig Berman said in a written statement to Insider.

Even before the takeover bid was announced, Fabric executives were attempting to sell some of their own shares in the company, with mixed results. An internal document obtained by Insider suggests that in March the executives contacted at least 20 venture capital funds — as well as secondary equity markets including Equity Zen and Nasdaq — to sell their shares. Several companies passed on the stock offer, according to the document, citing Fabric’s $1.5 billion private valuation and the state of the market as reasons for their decline.

It’s common for startup executives to sell their shares in the company on occasion, but allowing executives who’ve only been there for 12 months is considered rare. For context, senior management at AI startup DataRobot recently came under internal and external criticism for allowing young executives to sell their shares as its price peaked, while not allowing employees the same opportunity. .

Fabric, founded by Ryan Bartley and Shiv Agarwal in 2017, offers commerce tools for mid-tier businesses. The company is backed by prestigious investors like SoftBank, Redpoint and Norwest Venture Partners and has grown rapidly from 40 employees at the end of 2020 to around 400 today.

Fabric has raised $293.5 million since its inception in 2017. The company recently raised its largest round, a $140 million Series C led by SoftBank, selling investors a complex headless trading platform that would help brands migrate from older commerce systems. The platform includes a suite of different applications that the company implements for its customers internally.

Despite the cash trail, the company’s CEO, Faisal Masud, said in a June 27 blog post that the company plans to “tighten up” operations and reduce the company’s burn rate by about 15%. Masud wrote that Fabric “ripped the band-aid off” by “re-leveling” 20% of the company with lower wages. He added that these changes were “not popular with the staff”.

“It’s a good thing that they raised the jackpot, in a way. Because no one will give them any money at the end of this year,” a current executive told Insider.

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