Walmart buy: Flipkart staff set to gain from ESOP worth $800 million

Walmart buy: Flipkart staff set to gain from ESOP worth $800 million
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Bengaluru, Sep 20: Flipkart employees with stock options look set to make solid gains from Walmart’s acquisition of the Bengaluru-based e-tailer.
The employees have received emails asking them to tender a part of their shares under the employee stock option plan (ESOP). The email said the share buyback programme will be completed by the end of this month.
In May, the company had announced that employees can encash their vested stocks. It was also reported then that current employees would be allowed to tender 50 per cent of their vested shares in the first year, and former employees 30 per cent of their shares. The employees would be allowed to encash the remaining over subsequent years.
According to a previous filing by Walmart, Flipkart’s ESOP pool consists of 11,947,026 shares out of which
the US retailer would buy 6,242,271 shares. Based on the expected pricing of around $130 per share, Walmart would have to spend more than $800 million on the share-buyback if employees tender all their vested shares. The emails sent to employees, however, did not specify the pricing of the share buyback. The buyback comes following the closure of Walmart’s acquisition of Flipkart.
“Flipkart has a strong culture of fairness and does acknowledge that employees are an invaluable asset. We take immense pride in being the employer of choice and believe in rewarding employees by making them partners in the organisation’s success. The ESOP repurchase programme, a yardstick for the industry, is part of our continuing efforts to thank and reward our employees for their service,” a company spokesperson said in an emailed response.
The latest buyback comes after the $100-million share repurchase that Flipkart announced late last year — the largest such buyback then by a privately held internet-based startup in India. In April last year, the company had issued differential stock options to all eligible employees to protect them from the share price drop following its mammoth $1.4-billion fund-raise. Flipkart then had raised funds at a valuation of $11.6 billion, down sharply from the previous valuation of $15.2 billion.
Indian internet-based startups have been using ESOPs to lure talent to work with them. In many startups, ESOPs form a significant proportion of the total compensation of executives because the company often lacks funds to provide good cash compensations.