An Employee Stock Purchase Plan (ESPP) lets employees buy company shares at a discount through payroll deductions. Employees contribute a percentage of their salary over an offering period, typically 12–24 months, with purchase periods every 3 or 6 months. The discount can be up to 15%, and when a lookback provision applies, the purchase price is based on the lower of the stock price at the beginning of the offering period or on the purchase date. So, if the stock falls from $100 to $80, employees could buy at $68; if it rises to $120, they could buy at $85.

For founders building equity programs, qualified ESPPs under Section 423 receive favorable tax treatment: employees aren’t taxed when they purchase shares, with taxes applying when they sell. Non-qualified ESPPs don’t receive the same special tax treatment.

upGrad completed its acquisition of Unacademy on September 1 in an all-stock deal valuing the edtech company at just over $200 million, more than 94% below its 2021 peak of $3.44 billion.

The deal structure matters alongside the price. Unacademy shareholders receive upGrad shares rather than cash. Shareholders who held equity at any of Unacademy’s prior fundraising marks now hold upGrad shares priced against a $200 million baseline.

For founders and cap table holders: an all-stock acquisition converts prior equity into acquirer shares, not cash. The value realized depends on what the acquirer’s shares are worth, not on what the acquired company once raised at.

Source: TechCrunch