Learning about the Facebook share sale by employees (see our previous post: Facebook Share Sale Highlights Shortcomings of VC Tactics), I wondered why Facebook never introduced two main clauses in the shareholder agreements.
Piggy Back Rights and Drag Along Rights. Depending on the shareholder agreement in question and how it is defined, the rights alter a bit, but ultimately, the idea is that any offer to any one shareholder must be matched by an offer of similar and equal value and terms to all other shareholders.
The Drag Along allows a majority shareholder to enforce minority shareholders to be dragged along so that they don’t drag their heels and waste the big shareholder’s time, basically.
The Piggy Back allows a minority shareholder to be entitled to receive an offer of similar value if the majority shareholder(s) are made one.
In Facebook’s case, there very well could have been such rights included, but they might have been defined differently with regards to class of shares.
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Facebook Share Sale Highlights Shortcomings of VC Tactics
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