A cautionary tale on pulling off a Paytm secondary share sale

Why read this story?

Editor's note: The story goes something like this. Sometime earlier this year, two vice presidents of Paytm decided that they must liquidate their equity stock options in the company. That process usually involves acquiring the shares, paying tax on them to the government and then converting them to a demat form. Once that happened, the duo began looking for potential buyers. Now it so happened that they found a buyer who was willing to offer them Rs 18,000 per share. That’s very good money, and I’ll get to why in just a bit. Unlike say a normal transaction, shares of a private company like Paytm or any other startup usually come with a right of first refusal. This means that the ultimate decision to bless the transaction rests with the board of the company. In eight out of 10 cases, the board asks for nominal details like name of the buyer, antecedents, price at which the seller is selling the stock and clears the deal. In this case too, the board sought all the details and blessed the transaction. Remember, this is …