Flipkart Plans Mega $125 Mn ESOP Buyback In Upcoming Round: Report

In the process of raising fresh funds, ecommerce giant Flipkart is looking to start a buyback of employee stock options (ESOPs), which would result in employees cashing in on their stocks in the company. This would be the second major ESOP buyback for Flipkart in recent years. The company is said to planning a $125 Mn ESOP buyback in its upcoming funding round, which has been speculated for weeks now.

Ahead of a potential IPO next year, Flipkart is said to be in talks to raise $3 Bn from investors including SoftBank and several sovereign wealth funds. Flipkart’s previous buybacks in 2018 after the Walmart acquisition and then in 2019 had resulted in hundreds of employees turning into millionaires. The ecommerce platform claims to have 15,000 full-time employees in India. Its latest ESOP buyback will coincide with its upcoming round, according to a TOI report.

Flipkart is reported to be in advanced stages of discussions with ADQ, formerly known as Abu Dhabi Developmental Holding Company, for a mega $400Mn-$500 Mn investment, as part of its upcoming funding round. The round, which would value Flipkart at roughly $35 Bn-$40 Bn, is expected to be concluded in the next few weeks, with SoftBank leading the round.

The Bengaluru-based ecommerce giant is targeting a valuation of $40 Bn with this round and is in discussions with Singapore’s GIC, the Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority. After exiting Flipkart in 2018, Japanese conglomerate SoftBank is in talks to invest $700 Mn in the ecommerce marketplace.

Flipkart’s stock options are usually granted over a four-year period, with employees vesting them every month after a one-year threshold. In May 2019, Flipkart issued $100 Mn (INR 700 Cr) worth ESOPs for its senior and middle-level staff across Flipkart and Myntra in a move to hold onto its key talent. After the Walmart acquisition in 2018, Flipkart employees were able to sell 50% of their vested ESOPs.

At the time, current employees were allowed to sell 50% of their vested options at the close of the deal and former employees were given a chance to liquidate 30% of the vested shares. Employees were told they could liquidate 25% each in the second and third year after the close of the deal. The transaction price was in the range of $125-129 per option.