Flipkart’s ESOPs fable has a bitter twist for ex-staff
BENGALURU: Walmart Inc.’s plan to buy back roughly $500 million worth of employee stock options following its $16 billion majority purchase of Flipkart has left former employees of India’s largest online retailer feeling that they have been treated unfairly.
While current Flipkart employees will be allowed to encash their holdings fully over the next two years, former employees can only cash out 30% of their vested options and have to hold on to the rest for an undefined period, according to Walmart’s plan.
A dozen former employees Mint spoke to said they were considering ways in which they can get Flipkart to pay them. For former employees, it’s particularly shocking because Flipkart had been the fairest employer among all Indian start-ups in terms of offering stock options.
“This is a terrible deal, especially for people who had been at the company for many years. If you played an important part in
building Flipkart, right now you’ll feel like you’ve been cheated. There’s no communication from Flipkart on what happens to the 70%,” said a former employee who had worked at Flipkart for more than five years.
To be sure, the ESOP pay-out by Walmart will still be the biggest-ever in the Indian start-up world and is expected to turn a few hundred Flipkart employees into crorepatis. Over the past six years, there have been at least five other buybacks at Flipkart, including a $100 million repurchase last year.
But given that Flipkart, including its unit Myntra, has employed tens of thousands of people over the past decade, hundreds of former employees will be left with significant stock in the company with no visibility on when it will turn into cash.
“It seems unfair to treat current and former employees differently—if your options have vested, you should ideally be treated like any other shareholder,” said Subramanya S V, founder of fintech startup Fisdom and a former MD at venture capital firm Bessemer Venture Partners India.
The differential treatment has reignited the debate among startup employees, investors and entrepreneurs about how employee stock option plans, or ESOPs, should be treated.
(Anirban Sen contributed to this story)