Stock options: What they are and why we offer them

What would happen if our employees were all co-owners of the company? What if they had the opportunity to participate in the upside of the tremendous value creation at SadaPay? 

Fun fact! Over 70% of our team have been awarded stock options, and the rest are well on their way to getting them with exceptional performance. Our Share Incentive Plan was created so that our employees can share in our company’s success. 

Just to provide a bit of context, the United States has about 7000 Employee Stock Ownership Plan (ESOP) in the United States, holding total assets of over $1.6 trillion (Source: National Center for Employee Ownership). In India, we have seen the NASDAQ listing of Freshworks in September that created nearly 500 ‘crorepatis’ and the recent IPO of Paytm that created nearly 350 millionaires (Source: Economic Times India). A more relatable example from our own backyard would be that of Careem, which was acquired for $3 billion by Uber and helped 75 employees become Dollar millionaires in 2019.

Stock options provide employees a genuine feeling of ownership in the company they’re helping to grow, which aligns the company’s interests with those of our employees. We also encourage fellow startups to introduce ESOPs because teams that are given ownership, take ownership! And nothing pushes a company forward like people who are ‘invested’ in its success 🚀

Stock options are a relatively new concept in Pakistan and the understanding around their value is also limited. We wanted to demystify the complexities around our approach to awarding these shares so candidates can make informed decisions for their careers and other fast-growing companies can also consider building an ESOP strategy.

What are stock options?

Stock options are basically a contract between the company and the employee, which allows the employee the right to purchase stock for a pre-set price (“Excercise Price”).

Stock options give employees the opportunity to become shareholders in the company. Imagine being an early employee of Apple who was given stock options with a $1 Strike Price. Now that Apple has grown and is worth over $100 per share, the upside on those stock options would be very attractive!

Stock options are complicated assets and understanding them is not so Sada 😅 But you can wrap your head around them if you understand the following few definitions:

Strike Price:

When given stock options in a company, your Strike Price (or Exercise Price) is the price per share at which you have the option to purchase and take ownership of your stock. This price is lower in the early days of a company, but it will increase as a company grows and becomes more valuable. 

If you decide to purchase or “Exercise” the Stock Options that have been granted to you, you must pay this amount (number of shares x strike price) to the company and you become the official owner of these shares. In other words, you have to pay a small price (relatively) to acquire these ‘options’. You can only exercise your shares that have been ‘vested’, a concept we’ll explain next.

Vesting:

The shares that are granted to you when you join a company, ‘vest’ over a period (typically 48 or 60 months) with a ‘cliff period’ of 12 or 24 months (we’ll explain “cliffs” below – we told you this wouldn’t be so Sada 😅). Vesting means you have to earn your employee stock options over time. Employers do this to encourage you to contribute to the company’s success over many years. 

Imagine receiving a grant of 10,000 options from an exciting company that vests over 48 months. Every month that you spend with the company, you earn 200.8 stock options (10,000/48). When the grant was made, the share price was $5 but over time, the share price moved up by $10 every year. By the end of the 4th year, the total worth of your shares would be 10,000 x $45 = $45,000.

Think of it as an investment into the company, where you invest your time, not money. That time earns you shares that have the potential to grow in value over time because of your contributions. If you decide to leave the company after 24 months, you will have earned 5,000 of the 10,000 stock options. 

Cliff Period:

The ‘cliff period’ is the minimum time you must stay with the company to earn (vest) your shares. The cliff is usually 12 months. Grants have cliff periods because companies encourage you to stay with them and contribute to it’s success over many years. Imagine if someone joined a company but left just a month later. If there was no vesting mechanism, the company would have lost all of those stock options.

Selling Shares:

Perhaps the most important thing to understand about stock options is their ‘liquidity,’ or when you are able to sell them for cash. Since startups are usually private companies, their stock is not traded on the public stock market. Here are a few examples of “liquidity events,” when a company’s stock can be exchanged for cash:

  • If the company is acquired by, or merges with, another company, you might be given the opportunity to sell some or all of your shares to the acquiring company for cash.
  • When the company raises funds from new investors, you may be given the opportunity to sell some of your shares to the new investors in a “secondary sale.” This usually happens when investors are very excited about a company, so they want to invest more and buy as many shares as possible. 
  • From time to time, the company may organize a “tender offer,” which allows you to sell some of your shares back to the company.
  • If the company decides to have an IPO or “goes public” by listing on a stock exchange, you’ll be able to sell your stock in the public stock market.

When we raised our seed extension round of $10.7m back in April 2022, employees with vested shares were allowed to sell a percentage of their total shares as part of a “secondary sale.” (fun fact: most didn’t!)

Selling shares in a secondary is completely optional. Staying true to our value of transparency, we help employees make this decision for themselves and their families with complete information.

The future value of your stock options is always uncertain but in case of a liquidity event, it can be a good idea to sell a few of your options for urgent financial needs or just to reward yourself for your hard work. On the other hand, people must keep in mind that they are selling an asset that may be worth a lot more in the future. However, if the company does not perform well, the options may be worth much less, thus the downside risk can be reduced by selling a small amount in the instance of a liquidity event. 

How we do stock options at SadaPay

SadaPay is one of the rare companies in Pakistan that has had an ESOP (Employee Stock Ownership Plan) since its inception. With the exception of entry-level roles, every offer we send out includes stock options. When there is value creation and the company grows, additional capital can be raised at higher valuations and the price of the shares increases as well.

We have grown at an incredible pace since then and recently crossed a hundred employees. 72% of these Sadanauts have ownership in the company. We also have performance grants at the end of every year and exceptional performers are rewarded with additional shares. For some of the earliest joiners, the stock value has already more than tripled in the past year! 

We truly believe that giving Sadanauts this opportunity will have a huge impact on existing employees, prospective candidates and on SadaPay as a company. As we continue to scale, our ownership structure allows us to keep hiring the best talent around the world and make sure everyone at SadaPay will be able to benefit from some of our success so far!

If all of this speaks to you and you think you can add value to a progressive and growth-oriented environment like ours, then head on over to our Careers Page and check out our available job openings! We’re always looking to expand our rocketship with passionate individuals and we’d love to speak to you if you believe in our mission of making money Sada. 

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SadaPay is registered as SadaTech Pakistan Pvt Ltd with the Securities and Exchange Commission of Pakistan (No. 0136598), is regulated by the State Bank of Pakistan, and is a wholly-owned subsidiary of SadaPay Technologies Ltd., registered in the Dubai International Financial Center under commercial fintech license #3263.

SadaPay Mastercard debit cards issued pursuant to a license by Mastercard Asia/Pacific Pte. Ltd.

Offices

SadaPay Head Office
Ufone Tower 9th Floor,
Jinnah Avenue, Block F-7/1,
Blue Area, Islamabad
 
SadaPay Lahore Office
Vogue Towers 3rd Floor,
MM Alam Rd, Block C2, Gulberg III, Lahore, Punjab, 54000
 
SadaPay Karachi Office
MA Tabba Foundation Building, 1st Floor, Gizri Rd, Block 9 Clifton, Karachi, Sindh 75600
 

SadaPay UAE Office
FinTech Hive,
Gate Avenue, Zone D, Level 1,
Dubai Int’l Financial Centre,
PO Box 507211, Dubai, UAE

 
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