Welcome back to the world of Fables of ESOPs! Following the year-wide trend, December also saw a drop in ESOP allotments and the liquidity initiative, crumpled by the funding winter. Though we didn’t see anything major happening in the month of December, we are certain that with another year, another breakthrough will arrive in the ESOP realm and bring everything back on track. Before we discuss the possibilities that 2024 upholds, let's discuss what December had to offer.
CarDekho Group Announces $5 Million ESOP Liquidity Buyback
Autotech and financial services solutions provider CarDekho Group has introduced an Employee Stock Ownership Plan (ESOP) liquidity buyback program, allocating a pool of $5 million. The program is tailored to benefit both present and past employees who possess shares in the company. In the fiscal year 2023, CarDekho Group showed a formidable 46% year-over-year surge in consolidated revenue, reflecting its impressive performance and standing in the market.
Sun Pharma concludes ESOP plan of former Ranbaxy employees and subsequently closed the Trust
Sun Pharmaceutical Industries has wrapped up its Employee Stock Option Plan 2015, citing the fulfillment of obligations, and subsequently shut down the trust established for this purpose. The trust, initially named the Ranbaxy ESOP Trust, managed the Employee Stock Option Plans (ESOPs) of individuals who were previously associated with Ranbaxy Laboratories Ltd. Sun Pharma's acquisition of Ranbaxy, a transaction valued at $4 billion in 2014, was successfully concluded in March 2015.
JM Financial saw a 10% increase in its stock on December 15, attributed to both a change in management and the allocation of equity shares due to the exercising of stock options by eligible employees. So far this year, JM Financial shares have risen 32 percent, outperforming benchmark Nifty 50, which has delivered a return of over 16 percent during this period.
Before we end this year, let’s do a quick recap of what 2023 added to the ESOP frenzy. Flipkart’s $700 million ESOP payout tops the chart.
➢ Flipkart announces a one-time discretionary cash payout worth $700 million as part of PhonePe separation
Flipkart is all set to execute a record $700 million payout for its employees holding stock options as a one-time adjustment arising due to the separation of the PhonePe entity. PhonePe executives Sameer Nigam and Rahul Chari are expected to cashout $20–$25 million each as part of their liquidation of existing stock options in Flipkart. This secondary sale is largely financed by Walmart.
➢ Sunstone announced an ESOP Buyback worth $2.2 million.
Edtech startup Sunstone announced that it has initiated an ESOP buyback plan worth INR 18 Cr ($2.2m) for 20 of its former and existing employees. The development comes six months after Sunstone raised $35m in a Series C funding round led by Westbridge Capital.
➢SEBI informal guidance note on the definition of Employees
With the nature of the workforce changing in some of the new-age business models, there is a larger requirement of offering long-term incentive or equity-based compensation to non-employees as well. While companies have tried to do that using hybrid instruments, traditional ESOPs as an instrument weren’t eligible to be offered to non-employees, contract workers, or gig workers in Indian companies. We have seen several companies offering ESOP-like instruments to their gig workers, such as Unacademy offering T-SOPs to their teacher partners and Urban Company offering P-SOPs to their partner gig workers, among others. Directionally, there seems to be an indication from SEBI in this matter by expanding the definition of employees to include doctors who work part-time with this company and who sought SEBI’s response in this matter.
➢Souled Store announces the ESOP Buyback program post their $16.4 million Series C round
Souled Store, a lifestyle and fan merchandise startup that announced its $16.4 million Series C funding recently, also announced an undisclosed ESOP buyback program. The unique aspect of the buyback program is that the company offered to buyback 100% of vested options, and they have signalled that they intend to make it a ‘habit’, in a way indicating continuous opportunities for employees to liquidate and seek value from their ESOPs.
➢ Rapid Response now owned by its employees through its ESOP Plan
Missouri-based trucking company Rapid Response has been sold to its employees under an employee stock ownership plan (ESOP). Investment banking firm ButcherJoseph & Co., which advised Rapid Response on the transaction, announced the closing Friday. Rapid Response is listed as having 65 drivers and 69 power units, according to Federal Motor Carrier Safety Administration data.
