Unacademy cuts ESOP exercise window for ex-employees to 30 days amid M&A talks
Unacademy has reduced the window for former employees to exercise vested stock options to 30 days from up to 10 years earlier. The change forces ex-staff to exercise options and pay taxes or forfeit vested ESOPs.
Edtech company Unacademy has amended its employee stock option (ESOP) scheme, sharply reducing the window for former employees to exercise vested stock options to 30 days—from a period of up to 10 years earlier—according to an email sent to ex-employees, shared on social media platform X.
The email, sent by Qapita Liquidity on behalf of Sorting Hat Technologies, Unacademy’s parent entity, said this was part of an amendment to the company’s 2018 ESOP plan.
Under the revised terms, employees whose engagement with the company has ended must exercise their vested options within 30 days of cessation. To align employees who have exited with current staff, the board has provided a one-time 30-day exercise window from the effective date of the amended scheme, after which unexercised options will lapse.
The communication noted that exercising the options would trigger an immediate tax liability under Indian tax laws. It also said that the valuation for ESOP exercise purposes is based on the company's latest merchant banker-led valuation of about Rs 2,650 crore (about $295 million at current exchange rate), as cited in the email.
This marks a stark contrast to Unacademy’s peak valuation of about $3.5 billion during the pandemic-era funding boom, when the company raised large rounds from investors including SoftBank.
“Unacademy is under M&A discussions at a similar valuation for an all-stock deal where there will be no cash involved. This means that founders and investors are not getting any cash as a part of this deal. Since the valuation is significantly lower than the money raised by Unacademy, which is over $800 million, shareholders have a right to apply liquidation preference, especially who came at a higher valuation and who will be losing money in an M&A at this valuation,” stated Gaurav Munjal, Co-founder & CEO, in an email shared with employees.
Munjal further clarified the technical impact on employee stock, noting that when "liquidation preference is properly enforced, ESOPs effectively become zero." To prevent this outcome, Munjal noted that the leadership had requested the board to "figure out a way to ensure that employees can get shares in the company if there is a stock deal, even if it is at a lower valuation."
The email also highlighted that shares in the private company are illiquid and that preference shareholders have priority over equity holders in the event of a liquidation, with no guarantee of payouts to equity shareholders.
The amendment stipulates that former employees must either fund the cost of exercising options and pay associated taxes within a short period or forfeit vested options entirely, a departure from the earlier framework that allowed long-term holding. The email described the change as a one-time opportunity for employees who have exited to achieve parity with existing shareholders by converting options into equity.
The development comes at a time when Unacademy is exploring a potential sale amid a prolonged downturn in the edtech sector.
Earlier this month, Munjal said in a post on X that the company is in discussions for potential mergers and acquisitions, adding that it would pursue consolidation if it resulted in a stronger combined entity.
Munjal said the company’s decade-long journey included a sharp reset after the pandemic-driven surge, as demand normalised and investor focus shifted towards profitability and cash preservation.
The SoftBank-backed company had held acquisition talks last year with Allen Career Institute at a valuation of about $800 million, which fell through over valuation differences. More recently, upGrad held discussions with Unacademy’s investors and founders at a valuation of around $300 million to $320 million, nearly 90% lower than the company’s last private valuation, as reported by YourStory earlier.
Unacademy did not respond immediately to queries shared by YourStory.
Feature image: Unacademy Founder and CEO Gaurav Munjal
The copy was updated.
Edited by Swetha Kannan