With increasing scale, valuation and evolution of startups, employees of many startups have become rich through encashing their Employee Stock Options (ESOPs). Several hundred employees across firms such as Paytm, OYO, BYJU’s, BookMyShow, Freshworks, PolicyBazaar, Lenskart, Swiggy, and Delhivery have vested their ESOPs while many will do in the coming years.
BYJU’s had recently expanded its ESOPs pool by 3.5X to Rs 1,300 crore. Paytm has also followed suit and proposed a new ESOP structure – ‘ESOP Scheme 2019’.
The company held its annual general meeting in the last week of September and passed a special resolution to approve the adoption of the newly proposed One97 Employees Stock Option Scheme 2019 (“ESOP Scheme 2019”).
According to RoC filings by Paytm, the company has increased its existing ESOP pool from 1,923,620 equity options to 2,166,524 equity options having a face value of Rs 10 each. The new ESOP scheme will have a maximum vesting period of 5 years.
The SoftBank-backed firm has added 2,42,904 shares worth Rs 357.66 crore to the revamped ESOPs pool. The new ESOP scheme makes up about 3.72% stake as per Paytm’s shareholding pattern and according to Entrackr’s back of the envelope estimate, the ESOP pool in total is valued about Rs 3,150 crores.
We have arrived at these numbers by factoring in Paytm’s valuation in its last funding round when it raised $300 million (Rs 2,103 crore) from Warren Buffet’s Berkshire Hathaway.
Through his firm BH International Holdings, the American investor had acquired more than 1.7 million shares for around $176 per share in September last year, valuing the Vijay Shekhar Sharma-led firm close to $10 billion.
Importantly, the current fair value of options as per the Black Scholes model could not be ascertained as the company has not released the exercise price for One97 Employees Stock Option Scheme 2019.
Apart from adding new equity options, Paytm also added restrictions on the transfer of shares issued under the ESOP scheme by including a right of the first offer in favour of investors and One97 Employee Welfare Trust in the event of sale of shares to a third party.
It’s worth noting that Paytm Mall also had its AGM on 30th last month and its members passed a special resolution to amend the existing PEPL ESOP Scheme 2017. However, there are no further details in this regard.
With the expansion of its ESOPs scheme, Paytm has one of the largest stock pools for employees in terms of volume (shares) as well as value. Recently, BYJU’s expanded its ESOP pool by about 250%. Expansion of ESOPs pool by growth-stage startups is a good sign for the ecosystem.
After encashing stocks, many would go on to turn entrepreneurs and angel investors. In the past 12-15 months, employees of UrbanClap, Rivigo, Unacademy, CarDekho, Razorpay, Droom, Zerodha and others have divested their ESOPs.