Who’s looking out for ex-Flipsters? Flipkart-Walmart deal raises an alarming question
At first, the Flipkart-Walmart deal seemed like a much-awaited harbinger of success for the country’s startup scene, but recent developments have raised some alarming questions that remain unanswered.
At 12.38 pm on Sunday afternoon, close to 300 former employees of Flipkart, who held fully vested ESOPs, received an email that confirmed their worst fears.
There had been rumours, but the email with the subject line: "Liquidity opportunity of vested stock options for ex Flipkart employees" told them this was a done deal. The email stated that only 30 percent of their stock options would vest with the company’s 77 percent stake sale to Walmart. There was no reference to the fate of the remaining 70 percent ESOPs.
Speculation has it is that the remaining can be liquidated only at the time of a future liquidity event like an IPO, but that is hardly a palatable solution. Ex-employees are stumped at this turn of events and are asking, "How is this fair? Why are we being treated differently?”
According to sources, current employees of Flipkart will be able to vest up to 50 percent of their stock options now, 25 percent next year, and the remainder the year after. The question now is, why not a similar path for ex-employees whose shares have been vested.
We have sent an email to Flipkart asking for their view, but there has been no response so far.
These are employees who served Flipkart well; they would not have received ESOPs otherwise. The stock options are an acknowledgement of their service and the value they brought to the company. Yes, they have moved on, but changing jobs does not take away their rights to liquidate stock options that have completed the vesting period.
It is true that most companies prefer that employees liquidate their stock options when they leave; it is also true that companies that cannot liquidate shares at the time of an employee's departure often allow them to continue holding their shares. When Flipkart completed a buyback last October, ex-employees could liquidate only 10 percent of their holdings; current employees could liquidate up to 25 percent. The net worth of the shares of ex-employees is currently estimated at $300 million.