Walmart buying Flipkart ESOPs

Flipkart employees are expected to strike gold through the deal of acquisition of the e-commerce giant by Walmart. Flipkart has recently allowed its employees – if they want – to sell their stocks to its parent company. The employee stock options present at their disposal had their valuation increased as a result of the deal. The increase in valuation is going to allow certain employees to achieve the status of millionaires upon stock liquidation as well.

Role of ESOPs in Walmart-Flipkart Deal

In the May of this year, Walmart completed the acquisition of Flipkart in a deal worth a mammoth $16 billion. But unlike most business acquisitions, the owner of the company is not the only one enjoying a profit. The deal increased the valuation of the pool of employees stock options (ESOPs) of Flipkart to over $1.5 billion. This would make at least 100 current and past employees millionaires upon liquidation of their ESOPs, should they choose to do it.

As such, as a part of the acquisition, Walmart is obligated to buy 6,242,271 shares from Flipkart’s total ESOP pool of 11,947,026 shares. This implies that Walmart will buy shares totalling a worth of about $800 million from Flipkart’s pool of ESOPs. The total ESOP pool of the Indian e-commerce giant is estimated to be worth around $1.5 billion. Flipkart itself bought about $100 million worth of ESOPs from its own employees in the December of 2017.

“The ESOP repurchase program, a yardstick for the industry, is a part of our continuing efforts to thank and reward our employees for their service”, a spokesperson from Flipkart said.

The Liquidation Of Flipkart ESOPs: Fine Lines

Flipkart recently announced in a letter to the current employees that they will be allowed to liquidate their employee stock ownership plans (ESOPs) at a rate of $126-$128, depends on the charges involved. As mentioned above, each one of about 100 of Flipkart’s present and past employees holds ESOPs worth over $1 million. The liquidation process will be executed in a systematic manner over a couple of years. The employees who are currently working for the e-commerce giant will be allowed to liquidate up to 50% of their vested ESOPs when the transaction between Walmart and Flipkart is completed. The rest of the 50% will be liquidated over the following 2 years. 25% of the rest of the ESOPs will be liquidated after a year of the first liquidation. The remaining 25% will be liquidated the subsequent year.

However, the ex-employees will be allowed to liquidate only 30% of their vested ESOP’s. This brought about a lot of discontent among the people previously working at Flipkart. The limitation to their liquidation implies that they would have to wait until there’s another liquidity event in the form of an Initial Public Offering(IPO). The ESOPs present at the disposal of the ex-employees is estimated to be worth around $200 million to $330 million.

Flipkart’s Plans For the Future

Flipkart was running riot in the Indian e-commerce market for some time. That was before the arrival of Amazon to the scene. That made the competition increasingly tough, with market shares being highly contested for. Recently, it is Amazon who is enjoying the upper hand. However, the people at Flipkart are unfazed.

Speaking about their plans to go public in the future, Binny Bansal, group CEO of Flipkart, said,” We believe we can be way more competitive with the right partners around. The other partner we have is Tencent, we also have Microsoft as an investor. Bringing the right partners on board is crucial, we believe, for success in the future”.

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