ESOPs repurchase plan will set a benchmark and boost faith in the concept of stock options in the Indian startup ecosystem.
If Flipkart is the bellwether of the Indian startup ecosystem, the much-awaited deal with Walmart, will be a confidence booster in the use of stock options as part of employee compensation in startups.
The impending acquisition of Flipkart by Walmart is most likely to bring a windfall for the employees of the former. Flipkart is likely to buy back shares vested to employees after the deal with Walmart is sealed.
Employees and sources who didn’t want to be named said that there is a sense of excitement and a strong rumour of Flipkart buying back ESOPs (Employee Stock Option Plan) from its employees. They said that employees have even started predicting the price of repurchase.
Questions mailed to Flipkart remained unanswered till the time of publishing the story.
Last year Flipkart bought back about $100 million of ESOPs after the deal with Softbank. Flipkart bought back stock options from its existing and former employees at $85.2 per unit with additional transaction fees of $3-4 per unit. Existing employees were allowed to sell 25 percent of their vested options while former employees have been allowed to sell 10 percent as per media report.
Speaking about the spin-off benefits that would be accruing to Flipkart employees, an early stage investor who didn’t want to be quoted, says, “It is a great thing for investors, founders and employees. Employees who have stock options, there is pretty much of value and worth on it now.”
He adds, “If this deal materialises, it will give a strong value to the concept of ESOPs, that other startups may like to emulate. They will have the hope that even their companies will have an IPO or get big investors and give them a chance to encash their stock options.”
However, Founder and MD of Wazir Advisors, Harminder Sahni, has a different opinion. He says, “I doubt if there is a significant chunk of ESOPs vested with employees, apart from both the founders. Even if there is a significant buyback, Indian employees are still orthodox, unlike the founders who are at the other end of the spectrum. Indian professionals still value cash and cheques than value in the form of ESOPs”.