Deepak Abbot, a former senior VP at Paytm says in a webinar,
While companies are leveraging ESOPs as a retention tool and growth-multiplier, employees are benefitting in the overall process. To summarise, ESOPs pave a way for employees to:
- Boost personal wealth (through equity ownership)
- Grow professionally (as primary contributors)
- Improve job security and satisfaction
- Actively participate in decision making
As companies grow multi-fold, they understand the value of loyal team members. By offering ESOPs as a reward scheme, companies are able to retain employees whose performance is stellar and at the same time attract those who can be potential assets to the startups.
Examples of ESOP Liquidity:
#1 | IPO
The IPO of IndiaMART in July 2019 resulted in its ESOP-privileged employees earning millions. The company offered 4.89 million shares (at a face value of INR 10 each) on the NSE & BSE, and the issue price of each share was listed at INR 970-973. 10,000 shares were reserved for employees at a discount of INR 97 per share. The stock shot up 40% on listing and today the stock is trading above INR 2000 per share. A similar trend was observed when JustDial, QuickHeal, Info Edge, and Matrimony.com went public.
#2 | ESOP BuyBack
Bangalore-based online freight aggregator BlackBuck bought back some ESOP shares from employees. 35 employees sold back their stock options at a price much higher than the FMV. The company’s senior HR management mentioned in a public release that BlackBuck bought back the shares to restructure its ESOP pool.