September 28, 2018
Airbnb requested the Securities and Exchange Commission change Rule 701 of the Securities Act to allow the privately-held company to give equity to its hosts, who are categorized as independent contractors under current law.
“Increasing eligibility for Rule 701 grants would help democratize share ownership and wealth,” the letter reads, “by allowing more ordinary Americans who participate in the sharing economy the opportunity to experience stock ownership and the potential to benefit when a private company goes public. The increased alignment of incentives between sharing economy companies and participants would benefit both.” Airbnb is reportedly looking at going public within the next two years.
The letter was submitted as a response to an SEC concept release exploring the need for future rulemaking to allow broader public investment in privately-held companies that issue stock. Rule 701 of the Securities Act allows privately-held companies to give stock to certain employees while exempting the companies from many of the regulatory requirements that apply to publicly-traded companies that give stock as compensation.
“As with traditional employees,” the concept release observes, “companies may have the same compensatory and incentive motivations to offer equity compensation to [gig workers]. Accordingly, we solicit comment regarding these ‘gig economy’ relationships to better understand how they work and determine what attributes of these relationships potentially may provide a basis for extending eligibility for the Rule 701 exemption.”
Looking ahead: Other gig companies have looked into providing equity to their workers, such as Uber, which has met with the SEC multiple times to discuss granting equity to their drivers. Advocates say this marks the latest in a string of developments lending themselves to the argument for the development of policies intended to fix current shortcomings of the independent contractor and employee worker categorizations.