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Walmart Set To Buy $800 Mn Worth Flipkart ESOPs

Walmart Set To Buy $800 Mn Worth Flipkart ESOPs

The current Flipkart employees will be allowed to liquidate their employee stock ownership plans (ESOPs) at $126-128 per unit

Walmart is obligated to purchase 6,242,271 shares from Flipkart’s ESOP pool

The worth of Flipkart’s total Esops is about $1.5 Bn based on the per-share purchase price

With new parent company– global retailer Walmart– Indian ecommerce giant Flipkart has been securing and strengthening its position in the Indian ecommerce industry, and at the same time, the company continues to assure the will and motivation for the Flipkart employees. The latest push comes in form of a letter to current employees.

As the company stated, the current employees will be allowed to liquidate their employee stock ownership plans (ESOPs) at $126-128 a unit, depending on the charges applicable.

It is to be noted that Walmart is obligated to purchase 6,242,271 shares from Flipkart’s ESOP pool of 11,947,026 shares, according to a recent filing by the global retail giant with the US Securities and Exchange Commission.

With this effect, Walmart will purchase from Flipkart employees ESOPs worth nearly $800 Mn. Essentially, Flipkart’s total Esops are worth $1.5 Bn based on the per-share purchase price.

Earlier, Flipkart said it would repurchase up to 30% of its former employees’ vested ESOPs (employee stock ownership plan) at a share price ranging from $125 to $129. However, as it had specified earlier, employees currently working with Flipkart will be allowed to:

  • liquidate 50% of their vested ESOPs following the close of the Walmart-Flipkart transaction,
  • another 25% at the end of one year following the first liquidation, and
  • the remaining 25% at the end of two years following the first liquidation.

However, the former employees will have to wait it out until the company goes public.

Flipkart Approach To ESOPs So Far

In May 2018, Flipkart reportedly set aside $500 Mn for the repurchase of the ESOPs.

Earlier, in October 2017, Flipkart’s board had approved a $100 Mn ESOPs repurchase programme wherein employees would be able to sell 25% of their vested shares and former employees would be allowed to sell 10% of their stake; this process was completed in December.

The company had also earlier set aside $400 Mn to buy back shares of minority investors in an attempt to revamp itself as a private limited company (Flipkart Pte Ltd) in Singapore.

ESOPs To Keep Employees Happy

For ecommerce and the other startups in the online domain, ESOPs have become a way to retain key employees. Way back in 2015, Snapdeal had increased the proportion of its equity to be distributed among employees from 6% to 10%. Among its 4,000 employees, the company had selected one third, i.e. 1,200, as top performers who were to be rewarded with stock options.

In addition to the ESOP saga, founder and CEO of Paytm Vijay Shekhar Sharma had also pledged about 5% of his personal holding in Paytm Mall for the ESOP pool. This move added about $50 Mn worth of stocks to the ESOP corpus.

Further, early this year, furniture player Urban Ladder joined the ESOP bandwagon and offered ESOPs in order to attract senior-level talent, as per the MCA documents filed by the company.

Recently, the board of hospitality company OYO approved ‘ESOP Plan 2018’, a new employee stock ownership plan. The board has added more benefits in the new ESOP plan, which is an amended form of the one approved by its shareholders in 2013.

Prior to this, the board of Unicorn food delivery company Swiggy approved its first employee stock repurchase programme. The share buyback or Esop, which had to be implemented in June, was estimated at over $4 mn (INR 27 Cr).

The interest shown by various companies in ESOPs is a testimony to the fact that India’s Internet business ecosystem is maturing and treading along a path of growth.

[The development was reported by ET.]

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