Anthropic is brewing a special plan to arrange for employees to sell their shares after listing
As Anthropic prepares to go public, the company is considering a rare move: requiring rank-and-file employees to sell stock according to a fixed trading schedule to avoid legal risks related to insider trading, two people familiar with the matter said. In the past, companies that adopted such transaction plans generally only had senior executives and some financial and legal personnel involved. This type of mechanism is called a 10b5-1 trading plan, which requires executives and directors to sell stocks according to a preset schedule. The plan specifies the reduction quantity and trading price range. A person familiar with the matter said that Anthropic is considering this plan to continue to maintain a corporate culture of free flow of internal information after the company goes public. Negotiations between Anthropic management and outside advisers on enforcing the deal remain uncertain, and it is not yet confirmed whether the company has made a final decision. How and when employees will sell off their shares is one of the core issues Anthropic needs to finalize before launching its IPO. The company expects to go public as early as September. The topic may be discussed this weekend as the company plans to hold an IPO roadshow meeting with potential public market investors. Anthropic's valuation has climbed significantly over the past three years, from about $4 billion to $965 billion, and it's expected to continue rising post-IPO. This paper wealth will allow early employees to gain huge benefits; but if a large number of employees sell out in a concentrated manner, it may also put pressure on the stock price after the listing. Most public companies generally stipulate that employees can only trade stocks during a window that lasts several weeks after the release of earnings reports. Forcing employees to adopt a preset trading plan can enable transactions outside the window period, but it will limit employees' ability to choose the timing and quantity of transactions, and it will also help spread employees' holding reduction behavior over a longer period. Another person familiar with the matter said Anthropic is also discussing how much existing shareholders can reduce their holdings on the first day of listing and how to set up a lock-up period - a common rule for listed companies to restrict insiders from selling shares after the IPO. However, extending the scope of the 10b5-1 plan to all employees does not necessarily solve the above problems. Amodei also said that the company implements a strict information isolation mechanism to limit the core information about the progress of artificial intelligence technology that employees can access. He said in a 2023 podcast that the company strives to "strictly protect the small number of truly critical confidential information and keep the rest of the information as free and open as possible." Even the largest public companies that mandate the use of 10b5-1 fixed trading plans by their top managers are in the minority. A report last year by law firm Gibson & Dunn found that only 13% of S&P 100 companies require or encourage directors and executives to trade stock only through a 10b5-1 plan. Liz Walsh, a capital markets lawyer at Mayer Law Firm, said that more and more companies are considering extending this system to more employees. “It is becoming a trend to extend this rule to all employees, especially start-ups that rely heavily on confidential technology.” Such companies “don’t want their employees to be implicated in insider trading allegations. Litigation is costly, distracting, and negatively impacts all parties involved.” She added that for employees, the disadvantage of this mechanism is the lack of flexibility: "Transactions are bound to a fixed schedule and they cannot choose the opportunity to operate according to their own wishes."