65-year-old CEO sells his company and makes 88% of his employees millionaires

Jay Chaudhry, 65, is now known as the billionaire founder and CEO of Zscaler, a cybersecurity company valued at about $28 billion. Back in 1998, he was an entrepreneur who first sold the startup he started with his wife Giotti. That business was SecureIT, which he sold to VeriSign in a deal that included all the shares for a huge profit.

Nearly two years after the deal closed, with VeriSign’s stock price soaring, most SecureIT employees “on paper, were millionaires,” Chaudhry tells CNBC Make It.

“People went crazy at the company because they never expected so much money,” he says. “A lot of them were buying new houses. They were buying new cars. I know one guy who took six months off, rented an RV and drove all over the country. They could do whatever they wanted to do.”

Between the time of the acquisition and February 2000, VeriSign’s stock rose by more than 2,300%, yielding $253 per share. Later that year VeriSign’s stock lost about 75% from its high at the end of 2000.

Chaudhry recalls the advice of Jim Binzos, then VeriSign’s chairman, about what to do with his shares: Sell some of the shares slowly “on a regular basis.”

“This strategy helped me reap some benefits from the upward movement of VeriSign’s shares before the market crashed,”

SecureIT employees who held onto VeriSign shares were likely rewarded for their patience: Its price closed at $254 per share as recently as January 2021. Its price today is around $175 per share.

The price today is around $175 per share.

Chaudhry says he doesn’t know if and when his former employees redeemed their own shares. When he left VeriSign in late 1999, his former employees threw him a party – but only later did he fully understand the impact the decision to sell SecureIT had on those employees.

“I went home that night and looked at the spreadsheet with all the stock options they had and multiplied it by VeriSign’s stock price. That’s when I realized it was 70 or 80 millionaires with stock options,” Chaudhry says. “It was impressive.”

“These employees are making a difference.”

Chaudhry himself already had enough money to be happy: “My wife and I had a nice, typical middle-class house at the time, and we didn’t have any fancy cars or big paychecks,” he told Make It last week.

Chaudhry and his wife financed SecureIT on their own, depleting their savings of about $500,000, rather than hiring outside investors.

That freed up more equity in the company to distribute, which was “good because those employees make a difference – they worked day and night,” he says.

The story is reminiscent of fellow billionaire Mark Cuban, who recently noted that he handed out bonuses to employees after selling Broadcast.com to Yahoo for $5.7 billion in 1999. “That decision turned hundreds of his employees into instant millionaires,” Cuban said.

Cuban has paid bonuses to employees at every company he has sold, starting with his 1990 acquisition of software company MicroSolutions from CompuServe. “That includes the sales of his majority stake in HDNet, now known as AXS TV, in 2019 and the NBA’s Dallas Mavericks last year,” according to a post on X.

“And HDNet alone had layoffs immediately after the sale,” Cuban added.