Duolingo allows employees to sell part of their shares in advance
Duolingo language learning platform Inc.
joined a group of companies that allowed their employees to sell part of their stock shortly after their IPO, easing the typical six-month lock-up, its chief financial officer said.
The Pittsburgh-based company, which offers digital tools for people to learn 40 different languages, was listed on the Nasdaq on Wednesday after valuing 5.1 million shares at $ 102 each. Shares closed at $ 134.44 Thursday, down 3.29% from Wednesday’s close.
Duolingo has a 180-day lock-in period, but the company allows employees with vested shares to sell 25% of those shares within the first seven days of trading, CFO Matt Skaruppa said. They will also be allowed to sell shares towards the end of the 180 days, he said. The company declined to say how many shares are vested.
“We wanted to give employees the opportunity to benefit financially from the start of the IPO,” Skaruppa said.
In doing so, Duolingo, which went public as part of a traditional IPO, borrows direct listings from the manual, which usually don’t have any blockages. The language school was also following in the footsteps of other tech companies, one of which was the Robinhood Markets business app. Inc.,
Snowflake data warehousing company Inc.
and Airbnb Inc.,
who all experienced looser blockages when they went public. Robinhood shares began trading on Thursday.
The concept of lock-in periods was introduced about 30 years ago by banks that took out IPOs and allowed a few exceptions over the years, said Jeffrey Cohen, partner in the capital markets practice at Linklaters. LLP, a law firm.
“The idea was to reduce any downward pressure on the price of the shares resulting from the sale and to limit the number of shares in the market, so that the offer price prevails,” Mr. Cohen said. Blockages were also seen as a sign of commitment to a company’s future, he added.
But a strong IPO and job market are changing that dynamic, Cohen said. “The pressure on companies to make their employees successful is greater than ever before,” he said.
Indeed, some banks now see early share sales by employees as beneficial to the share price, as they can temper a day one rise as well as equalize a decline after 180 days, when many insiders are looking to sell their shares, Cohen said. noted.
A total of 215 companies listed in the United States in the first six months of this year, raising $ 85.76 billion, according to data provider Refinitiv. That amount was more than three times the total for the first half of 2020 and much higher than the same period of 2019, according to figures from Refinitiv.
Founded in 2011, Duolingo has around 40 million monthly active users, some of whom pay subscribers to its premium service.
Duolingo said about half of its approximately 400 workforce held vested shares. The company, which raised $ 521 million when it went public, plans to spend some of it on research and development as well as new hires.
Mr Skaruppa, who will allocate the funds in addition to the company’s existing liquidity, said Duolingo plans to recruit around 100 people by the end of this year. The company had approximately $ 117.5 million in cash and cash equivalents as of March 31, according to a filing with securities regulators.
Mr Skaruppa, who became chief financial officer in February 2020, currently owns 114,811 shares alongside stock options, the company said in its filing. He won’t be able to sell shares as easily as other employees, according to the filing.
Write to Nina Trentmann at [email protected]
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