Oct 5, 2022
Orange Health, CityMall & Niyo announce Buyback Programs while Q3 sees a sharp drop in Employee Liquidity
Sharp drop in Employee Liquidity: $200+ million in Q3 2021 vs <$20 million in Q3 2022
We hope you had a wonderful Diwali with your family and friends. October ringed in the festive mood for the rest of the year with Dussehra and Diwali celebrations in India. While we didn’t see any ESOP liquidity programs being announced in October, several startups did announce ESOP pool expansions and awarded fresh grants to employees to celebrate the festive occasion.
Let's do a quick round-up of the key highlights in the world of ESOPs in October:
Car Retailing Unicorn- Spinny introduces a new ESOP plan for all employees.
Spinny, a car retailing marketplace, launched a new employee stock option plan under which all employees will receive stock options. This announcement is a part of several other employee benefit measures taken by the company like education sponsorship program, flexi-basket policy, etc.
These measures have been taken to reward employees for their hard work and trust in the startup.
The founder & CEO, Niraj Singh, said: “Since the inception, we have focused on nurturing a healthy working environment and a robust value system where we work to build a trusted relationship among all team members. Our reward philosophy is centered around modern thinking fueled by compassion, teamwork, and shared ownership,”.
Conversational AI Startup, Yellow.ai rolled their flagship ESOP plan worth $43Mn
AI startup Yellow.ai has introduced an ESOP policy worth $43Mn for all its global employees irrespective of their designation and tenure in the company. It is also providing options to extend ESOPs quarterly vesting after a one-year cliff period.
It claims to have over 900 employees globally and aims to increase it to 1000 by the end of the year.
FSN Ecommerce Ventures, parent of Nykaa approves ESOP and Stock Option Plan 2022.
The formulation and execution of ESOP’22 has been approved by the board of the parent company of Nykaa. Under the scheme, eligible employees will be granted a maximum of sixteen lakh options (about 0.33% of paid-up equity share capital of the company). This was received an overwhelming response from the shareholders who voted in favour of resolution in excess of 90% votes.
EV Startup, Ultraviolette announces ESOP Pool expansion by $22 Mn
Ultraviolette, an electric bike startup, expanded its ESOP pool by adding fresh option worth $22Mn. This announcement followed its recent funding news of $10Mn as a part of a Series D round from Exor Co-Invest.
Unacademy’ expenses rise in FY22 owing to higher ESOP related charge to the P&L
Unacademy’s losses reportedly almost doubled in FY’22 owing to its high ESOP costs which rose by 2.5X during the period. The loss amounted to Rs. 2,848 crores out of which ESOP costs accounts for 33%.
How does ESOP impact P&L of a Company?
As you heard from the earlier news about Unacademy, that one of the major components of the reported loss was due to expense recognized on account of ESOPs. One may ask what is the link here? After all, it’s not as if the company has paid out any cash to the employees yet, you may ask?
Yes, that’s right, while there is no cashflow impact on account of ESOPs when they are given out, there is yet a notional loss that does get impacted on Company’s books.
Why you may ask? Well, in most cases, ESOPs, especially in early-stage startups, are granted to employees at a price far lower than the fair value of the option and this value difference which is given out as a ‘benefit’ to the employee needs to be recorded as an expense on the company’s books to represent the value offered by the company to the employee at the time of granting the options. This expense is typically amortized over the vesting period of the options. The exact methodology of amortization would vary upon the accounting standards applicable based on the specific jurisdictions.
Do you want an Employee Friendly ESOP Plan?
Are you looking to set up an ESOP Plan or do you wish to review your current plan to make it friendly to employees in order to attract the best talent? We at Qapita can help you. Explore ESOP Advisory services.
Stay tuned to Fables Of ESOP.
Connect with me: srikanth@qapitacorp.com; LinkedIn; Twitter
