Unacademy Tightens ESOP Exercise Window for Former Employees
In a move signaling tighter control over its equity compensation, Unacademy has reduced the window for ex-employees to exercise vested employee stock options (ESOPs) to 30 days. The Bengaluru-based education technology company previously allowed departing staffers to exercise their ESOPs over a far longer period, with some options carrying an exercise window lasting up to ten years. The change, effective immediately for affected individuals, highlights a broader trend among startups to streamline equity plans as they mature and face regulatory or valuation-related pressures.
What This Means for Former Employees
Under ESOP programs, employees earn stock options that vest over time. Typically, when a person leaves the company, they have a limited window to exercise those options and convert them into shares. Unacademy’s decision to compress the window to 30 days reduces the time ex-employees have to decide to exercise or forfeit their options. This can create a more urgent financial decision for those who may be evaluating tax implications, liquidity considerations, and the current company valuation.
Valuation Concerns and Market Realities
Unacademy cited the valuation used for exercising vested ESOPs as a factor in the shortened window. In some cases, the valuation at the time of exercise is lower than the total capital invested by the company, which can complicate an employee’s decision from a financial perspective. By focusing the exercise period, Unacademy may be aiming to streamline administrative processes and reduce the risk of stale option grants that could complicate financial reporting under accounting and regulatory frameworks.
Implications for the Startup Ecosystem
Many startups around India and globally use ESOPs as a key tool to attract and retain talent, especially when cash compensation is restrained. However, as companies scale and seek more predictable governance, adjustments to ESOP terms become more common. Shorter exercise windows can help ensure that option grants remain aligned with current corporate structure, liquidity readiness, and tax compliance obligations. For former employees, the net effect is a pivot from long-term liquidity planning to shorter-term decision-making.
Practical Considerations for Affected Individuals
People affected by the change should consider several steps. First, review the ESOP grant agreement and any communications from Unacademy outlining the new window and any transitional rules. Second, consult a tax advisor to understand potential tax liabilities, as ESOP exercises can trigger income or capital gains taxes depending on jurisdiction and timing. Third, assess liquidity options and the potential value of exercising within 30 days, including the current share price, expected future growth, and personal financial goals.
What This Signals About Unacademy’s Governance
The revised exercise window may reflect broader governance shifts as Unacademy scales. Companies with higher scrutiny from investors, regulators, or auditors may adopt tighter controls around equity plans to improve forecasting, financial reporting accuracy, and equity plan administration. While such changes can be challenging for former employees, they are often part of a transition toward more mature corporate governance and clearer valuation practices.
Looking Ahead
As Unacademy and other tech firms navigate post-pandemic growth and potential market corrections, expect more adjustments to ESOP terms. Stakeholders—from current employees to alumni—should stay informed about policy changes, seek professional advice for financial planning, and monitor how these adjustments affect the broader value proposition of holding company equity in fast-moving markets.
