Unacademy puts ESOP amendments on hold after backlash from former employees

Unacademy puts ESOP amendments on hold after backlash from former employees

Edtech firm Unacademy has put on hold proposed amendments to its 2018 employee stock option scheme (ESOS 2018) following strong pushback from former employees over the tax and liquidity implications of exercising their options at a sharply lower valuation.

In an email sent to ESOP holders on December 19 and reviewed by Moneycontrol, the company said it is “putting in abeyance” the suggested amendments to ESOS 2018 until further notice. It added that all necessary corporate authorisations would be completed to give effect to the pause and that the scheme could be revisited at an “appropriate time” while balancing the interests of employees and other stakeholders.

The development comes amid heightened uncertainty around Unacademy’s future, including acquisition talks with rival edtech platform upGrad.

What were the ESOP changes that triggered the backlash?

As reported earlier by Moneycontrol, Unacademy had asked former employees to exercise their vested ESOPs within a limited window at a valuation of around Rs 2,650 crore, a sharp markdown from its peak valuation of over $3 billion.

Former employees raised concerns that exercising options would trigger immediate tax liabilities on illiquid shares, even as there was no clarity on when — or if — those shares could be monetised.

Why did Unacademy say the changes were necessary?

Unacademy co-founder and CEO Gaurav Munjal said the proposal was intended to protect former employees in the event of an all-stock merger, where unexercised ESOPs could lapse and become worthless due to liquidation preference structures that prioritise investors over common shareholders.

Munjal acknowledged the anxiety caused by the process and said the intent was not to disadvantage employees, but to ensure they retained equity rights in any potential transaction.

Why did employees object to the move?

Former staff said the compressed exercise window and lack of visibility on eventual payouts shifted disproportionate risk onto individuals, forcing them to choose between paying tax upfront or losing any potential upside altogether.

Several employees described the process as financially stressful, given the combination of valuation cuts, tax exposure and uncertainty around liquidity.

How does this tie into UpGrad acquisition talks?

The ESOP issue has unfolded against the backdrop of reported talks between Unacademy and upGrad for a potential acquisition valuing Unacademy at around $300–400 million (roughly Rs 2,800–3,500 crore).

Under the proposed structure, Unacademy’s language-learning app AirLearn is expected to be spun off as a separate company, with upGrad acquiring Unacademy’s core test-prep and offline learning businesses. Neither company has officially confirmed the deal, though Unacademy has acknowledged it is in M&A discussions. UpGrad is co-founded by Ronnie Screwvala.

What does the pause on ESOP amendments mean now?

By keeping the amendments in abeyance, Unacademy has effectively reverted to the existing ESOS 2018 framework, offering temporary relief to former employees who had raised concerns over the timing, tax impact and fairness of the proposed changes.

However, uncertainty remains over how ESOPs will ultimately be treated if acquisition talks progress, particularly if any deal is structured as an all-stock transaction.