employees can sell some shares on day one, altering lockup

John Riccitiello, chief executive officer at Unity Technologies SF, speaks during the TechCrunch Disrupt 2018 summit in San Francisco, California, Sept. 5, 2018.

David Paul Morris | Bloomberg | Getty Images

Unity’s top executives said at the company’s virtual IPO event on Friday that employees are allowed to sell some shares on the company’s first day of trading, rather than waiting for the 180-day lockup period to expire. Unity is set to debut on the New York Stock Exchange on Friday.

“We have employees across 17 countries and we wanted them to participate here,” Kimberly Jabal, CFO of the video game software company, said by video at the event. “We wanted them to be able to participate in the first day of trading if they choose to sell some of their vested shares.”

Unity said in its latest prospectus that employees and former employees, excluding executive officers and directors, can sell up to 15% of their vested holdings from the time the stock opens on the New York Stock Exchange through Sept. 30.

In a typical IPO, insiders and employees have to hold onto their shares for a lockup period that typically lasts six months, though bankers have the flexibility to shorten it. Keeping employee shares tightly held limits the amount of stock available for trading, in part so the market isn’t flooded with shares. 

The traditional IPO process has been under deep scrutiny over the past year because it’s viewed as a way for investment banks to get hot IPO shares to their preferred investors. Unity took a different approach, with Jabal and CEO John Riccitiello having potential investors submit bids through a platform that would allow them to choose the price and allocation, rather than leaving it to bankers. Jabal said that the lead bankers, Goldman Sachs and Credit Suisse, built the system that allowed them to see and vet the bids.

Riccitiello said by video on Friday that the company wanted to bypass what he called the “three-ring circus” between current investors, bankers and new investors. He said it was important to bring the company’s 3,700 employees into the IPO by letting them all virtually ring the bell together on Friday and to sell some shares on the first day.

Unity sold 25 million shares at $52 on Thursday, initially valuing the company at $13.7 billion and raising $1.3 billion. The first indication on Friday came in at $57 to $59.

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