Unacademy puts ESOP amendments in abeyance

Edtech firm Unacademy has put proposed changes to its 2018 employee stock option scheme in abeyance, according to an email sent to holders of the options. 

The short note said the company will pause the suggested amendments until further notice and complete any necessary corporate authorisations before deciding next steps.

“If required, the Company will revisit the ESOS 2018 at an appropriate time and will continue to strive to find the best outcome for its employees while ensuring that it balances the interests of all its stakeholders,” the email read.

This move follows intense criticism from former staff and wider debate in the startup community about fairness and tax exposure for ex-employees.

The issue began in mid-December when Unacademy informed exited employees that an amended ESOS 2018 would give them a one-time, 30-day window to exercise vested options, replacing what had previously been a much longer exercise period of up to ten years. 

That change was criticised because exercising options in a private company like Unacademy typically triggers immediate tax bills while offering no guarantee of future value.

Co-founder and CEO Gaurav Munjal had said the measure was aimed at preparing the cap table for potential corporate transactions and to give exited employees an explicit, if brief, opportunity to participate in any future upside. 

The clarification did not, however, ease concerns about the practical and fiscal impact on former staff who might face substantial tax liabilities on shares that could ultimately be worthless.

Experts have pointed out that while companies can alter plan terms under certain governance frameworks, forcing a compressed exercise window effectively shifts financial risk onto former employees and raises questions about proportionality and transparency. 

The episode, to certain extent, has reignited discussion over how startups design and communicate equity compensation, and whether regulators should provide clearer safeguards for people who have already earned those grants. 

The timing of the amendment is linked to Unacademy’s M&A discussions and to a marked markdown in valuation.

upGrad has placed a bid to acquire Unacademy at a valuation of $300 to 400 million, as reported by YourStory earlier. For context, Unacademy was last valued at $3.4 billion after raising $400 million from Japan’s SoftBank Group in 2021. It has raised over $800 million in funding across multiple rounds.