Blunder prevents early BuzzFeed employees from selling their shares

What to know: This is not about a lock-up agreement, which applies to top company executives and current employees who have vested and exercised stock options (the company moved to RSUs in 2017). This is an administrative blunder for former employees who were told their shares would not be locked up.

• Axios has reviewed email correspondence between BuzzFeed and former employees with vested and exercised options, some of which was first reported on earlier this week by Insider. Some ex-employees tell us they didn't receive all of the emails.
• On Nov. 23, the company wrote: "At this moment in time you don’t have to do anything," and said the company would be in touch shortly about next steps.
• The following day, employees received requests for documentation from Continental, the stock transfer agent hired by BuzzFeed. But nothing from BuzzFeed itself; that correspondence didn't come until last Wednesday night (Dec. 1).
• The Dec. 1 email says that the stock transfer process would take three to five business days. That means if a holder filled out the paperwork immediately, they still wouldn't have had access to their stock when it began trading on Monday morning.
• Such a delay did not apply to other early BuzzFeed shareholders, like venture capitalists, but it isn't unheard of.

Between the lines: The big hiccup here is that there was an extra paperwork step that ex-employees weren't told about until after shares began trading. Some received correspondence late Monday night (Dec. 6) from Continental, while some learned about it from BuzzFeed on Tuesday afternoon (Dec. 7). The Continental email again talked about an additional 3-5 trading days to process the new paperwork.

• Some BuzzFeed employees who responded immediately to Continental may have managed to sell shares. Others, including some who waited for BuzzFeed's instructions, have not.

• In its Tuesday email, BuzzFeed blamed Continental for the mix-up, and told ex-employees that: "We understand and sympathize with your frustration with this process." It did not, and has not, apologized.

The situation is exacerbated by the steep price drop, and a stock conversion ratio that already has caused some early employees to be underwater (including those who worked at BuzzFeed before it became a "unicorn").

• Axios called and emailed Continental, but was unable to get in touch with anyone there (the phone call involved "longer than usual wait times.").
• A BuzzFeed spokesperson declined to comment.
• BuzzFeed shares opened mostly flat this morning at $5.87 per share.

The bottom line: Startup stock options are about aligning interests between the company and employees, for better or for worse. A show of good faith by both sides. In the case of BuzzFeed, that faith has been broken.