Housing.com in another mess related to Rahul’s equity gift

Housing-logoHousing.com is back in news again. And, again, not for good. It was reported earlier that Rahul Yadav had given up his share in Housing.com to the employees of the company. Though lot of entrepreneurs applauded, no one actually thought about the practical issues that it can bring.

This ‘Equity Gift’ from Rahul is causing problems for the management and the employees of Housing.com. The main problem that is being faced by the management is how to distribute the shares among the employees. The shares cannot be just distributed to the employees – either as Stock Options or Phantom Stocks.

Phantom stocks are basically, in simple language, equity-linked cash incentives. This means, the employees are entitled to cash-equivalent payouts at a designated time and the value is aligned with the value of equity that they would have received. And, these stocks does not carry any other right, such as voting rights.

According to a leading news website, Housing’s chief human resource officer Ajay Nair wrote in the email to employees¬†–¬†“Rather than getting physical stock options, the employee receives a documented understanding with the company. The PSU follows the price movement of the company’s actual stock, paying out any resulting profits when due.”

Though management has decided to issue phantom stocks in stead of restock options, employees are now threatening the company of actions. The other challenge which company might face is the ex-employees, who have been recently laid off by the company, but were there when Rahul had announced this give-away.

Even otherwise, Housing.com will not be able to distribute Rahul’s shares to employees just like that, without impacting the ownership issues and it will become a public limited company. Issuing Phantom stocks not just avoids any legal issues, it also saves company tax and keeps the ownership issues contained.

Discussions

Rishie

Rishie is the founder-owner of Rishie’Nama. He has varied interests, ranging Humor to Finance and to Technology. He is an avid follower of anything related to Mobile. Internet. and Technology.