Business software maker Freshworks, which recently went public on Nasdaq, has initiated a share sale worth more than $500 million from its top management, board directors, current and former employees, and third-party contractors and consultants. This will be one of the largest ESOP cashouts by an Indian startup in recent years.
Freshworks plans to sell 13.6 million shares (13,555,142 shares) of Class A common stock from over 3,300 shareholders, the company said in a filing with US Securities and Exchange Commission (SEC) on November 4. The company's stock price had closed at $38.29 at market close on November 5, down from a high of $50.07 on November 2.
As per the filing, founder and CEO Girish Mathrubootham plans to offer 2.4 million shares (2,422,650 shares), thereby bringing down his stake in the company from 6 percent to 5.1 percent.
CFO Tyler Sloat will sell around 0.45 million shares while chief revenue officer Jose Morales and chief product officer Srinivasagopalan Ramamurthy will sell around 0.3 million shares apiece.
On October 29, Freshworks had announced a partial early lock-up release of 20 percent of the company's shares, as per the terms of the lock-up agreements.
A Freshworks spokesperson told Moneycontrol that the lockup release is for all vested shareholders, and not just employees.
"While the shares that were released on November 4 were based on 20% of the holdings, to the extent vested, not all the shares eligible for the lockup release were sold. With respect to the shares that were sold last week, almost all of those reflected the automatic sell-to-cover transactions to pay the taxes (which varied based on the individual employee's tax rate)" a company spokesperson said.
"Our Section 16 officers (Girish, Tyler and Jose) only have their required sell-to-cover transactions at this time, which will be reflected in their upcoming required filings with the SEC" the spokesperson added.
Read: Freshworks IPO creates more than 500 crorepatis in India, with 70 of them aged below 30
On November 3, the software-as-a-service (SaaS) major had posted a loss of $107.4 million in Q3 2021, its first earnings report as a public company. This was largely driven by stock-based compensation and related expenses of $138 million during the quarter. The firm had posted a profit of $1.3 million in Q3 2020.
Total revenue grew by 46 percent year-on-year to $96.6 million for the quarter, from $66.18 million revenue in the corresponding quarter last year.
Girish Mathrubootham-led Freshworks had become the first Indian SaaS firm to go public on the US stock exchanges in September this year. Earlier this month, the firm also briefly overtook long-time rival Zendesk in market cap before its share slump on November 5. At the time of writing this article, Freshworks has a market cap of around $11.4 billion while Zendesk's market cap is at $12.2 billion.
Also Read: Girish Mathrubootham: Freshworks IPO is a Roger Bannister moment for Indian SaaS, 'apna time aa gaya'(Note: The story has been updated to include Freshworks' response)