I have heard and read that some non-publicly traded companies prevent their employees from selling their pre-IPO equity. Why would they have such a policy?
A sale of private stock must be approved by the company that issued the shares. Some companies may not want their shares to be widely distributed. In addition, some employees of startups may feel pressured to hold onto their company stock as proof of loyalty. If there is a good reason for the sale—such as a downpayment on a house—a company could be persuaded to approve a sale.
I understand the proof of loyalty argument, but I don't understand the reason why
Some companies may not want their shares to be widely distributed
Is that to prevent some entity from obtaining a large fraction of shares of the company, and thereby get some control of it?