LOS ANGELES–(BUSINESS WIRE)–Quid, a smart liquidity tool for private shareholders, solves a common problem for employees of high-growth startups: the inability to pay extremely high option exercise costs before an IPO. Before Quid, if employees wanted to exercise shares before an IPO, options were limited for shareholders, which meant they would likely have to absorb large tax payments and exercise costs out of pocket. This problem has plagued shareholders for decades and forced many employees of private companies to wait for an IPO to practice. Quid’s shareholder-focused solution allows employees to borrow against the value of their private stock without having to transfer or sell stock. This approach allows Quid borrowers to access the capital they need while still being able to benefit from any stock appreciation. Quid was developed by Quid Capital Group which launched its first fund in 2017, as a pioneer in a growing sector of non-recourse loan products and has since deployed over 100 million shareholder loans to over 25 companies , including Unity, Palantir, Uber, C3, Affirm, and more. To learn more about Quid, visit www.getquid.com.
Historically, shareholders have limited choices in exercising private actions. The problem is further exacerbated by skyrocketing internal 409a valuations that make it increasingly expensive to exercise before an IPO. With an average annual salary below $200,0001, many tech employees can’t afford their exercise fees that can run into the millions, and even C-suite executives can be challenged to find the cash to exercise their options. This problem is further aggravated by the lack of alternatives for shareholders. Other options, such as secondary market sales, may not only result in suboptimal tax consequences and brokerage fees, but they do not allow shareholders to participate in potential growth in their shares. Often, these practices also violate company-imposed stock transfer policies. Quid addresses these fundamental issues by providing capital and liquidity training, before approaching a liquidity event. Unlike traditional loans secured by personal assets, loans from Quid are generally secured by private equity only. Repayment of the loan is then triggered when the company experiences a liquidity event, such as an initial public offering or a sale.
An early-career employee of fintech firm Affirm explained how he benefited from Quid’s lending model: “Quid allowed me to exercise my options before the IPO, which allowed me to capitalize on a very favorable exit. I have exercised over $1 million in options and saved more than twice that amount. As a shareholder, I view Quid’s loan offer as a wealth management strategy, not just as a liquidity option.
Quid Capital Group just had its best performing quarter in the fourth quarter. In November, the company announced its second fund which raised over $320 million. The company’s backers include funds managed by Oaktree Capital Management, LP (“Oaktree”), Davidson Kempner Capital Management LP (“Davidson Kempner”) and a leading Ivy League endowment. “Quid’s solution aims to optimize tax, option exercise and liquidity planning for our clients. We have seen regular, programmatic shareholder liquidity become a retention requirement for any late-stage high-end company,” said Josh Berman, co-founder of Quid Capital Group.
Main benefits of Quid:
Quid gives employees and shareholders access to capital while retaining the upside growth potential of the shares
No reimbursable fees for the Quid program
Quid generally requires no personal liability
Quid trades can take three days, while a stock sale can take months
About Quid Capital Group
Quid Capital Group was created by former startup founders who think equity compensation is broken. Quid offers a new type of pre-IPO equity loan. There is generally no personal liability on the loan, and it is intended to be fully compliant with company policy, allowing employees and shareholders to enjoy cash today without any outlay. The loan is repaid when the company has an IPO, sale, or other liquidity event, and employees can retain an uptick in equity through the liquidity event. Quid Capital Group is backed by Oaktree, Davidson Kempner and a major Ivy League foundation. Learn more at getquid.com.