Flipkart: $100mn ESOP repurchase plan; Diwali bonanza for employees
As many as 6,000 current/former employees of India's homegrown e-commerce giant Flipkart are in for a Diwali bonanza. Flipkart's board has approved a $100 million plan to repurchase employee stock options, said sources familiar with the development. The share buyback plan is being considered the biggest in India's start-up industry. It would give employees a huge opportunity to liquidate their stocks. Read more!
Employee stock ownership plan, or ESOP, is an employee plan that gives a company's employees a purchase (stock options) interest in the business. In an ESOP program, businesses provide their workers with stock control, mostly at no up-front charge to the workers.
Flipkart's move comes after it raised funds earlier this year from China's internet conglomerate Tencent and Japan's SoftBank Corporation. Apart from Flipkart staff, employees of its subsidiaries like Myntra and PhonePe would be part of the employee share buyback plan, expected to close by Dec'17. Employees can sell a certain percentage of their shares; senior employees could reportedly make "tens of crores".
The stock options of Flipkart are granted to employees over a period of four years. Employees can vest in them after the one-year threshold. In 2015, the company sold Rs. 240cr worth shares in its employee trust fund to high net-worth individuals to allow employees to liquidate their shares. Flipkart's early employees had also cashed out their holdings through the company's share buybacks.
Flipkart raised $4bn from SoftBank, Tencent, eBay, and Microsoft in Apr'17 in a new round of funding that saw its valuation drop. The investment was made at $11.6bn post-transaction valuation, much lower than Flipkart's July'15 valuation of $15.2bn. At the time, Flipkart said additional "differential ESOPs" would be issued to employees who were allotted shares when the valuation was higher to compensate their loss.
In 2016, the percentage of Flipkart's white-collar employees who were a part of the company's ESOP program was doubled to 35-40%. In July'17, the company reportedly offered ESOPs even to the top executives of Jabong, which was acquired by its subsidiary Myntra. In 2015, the Bengaluru-based company had 15,000 white-collar employees at its peak; the number stands at 8,000 currently.