ESOPs explained in 16 minutes.

Does your company ESOPs? If yes, then do you know about the cliff, vesting period, exercise period, and of course, taxes? If no, then watch this video to know everything about ESOPs.
0:00 - Let's begin
2:13 - Coming up next
2:33 - Salary & Incentives
3:48 - What are ESOPs?
6:10 - Why do founders give ESOPs?
8:24 - How to sell ESOPs?
9:44 - The problems with ESOPs
10:32 - Cliff & Vesting Period
12:09 - Exercise Price & Exercise Period
13:18 - Taxes
14:34 - Checklist before accepting ESOPs
16:11 - Bloopers

[@wsham]

wow i didn't even watch the full video because I wanted to leave a comment that zerodha is doing such a great job providing a deep level of investing knowledge for free! each video here is priceless

[@Zero1byZerodha]

Much appreciated!

[@vikram1262]

@@Zero1byZerodhaI wish you asked him to watch the full video

[@me-heer]

I’ve never rooted for anyone to get their slice of pizza like this bro

[@Zero1byZerodha]

Don't worry. He ate it 😂

[@me-heer]

@@Zero1byZerodha 🤣 this helps me sleep easy

[@Shubham_Toshniwal]

Wow! You simply and clearly explained it! Now I am addicted to this channel more than ever and not lying about it!!❤❤

[@abhilash_pb]

This is an excellent and high quality content ಬೆಂಕಿ 🔥

[@sanathkumarj3547]

LET THE MAN EAT HIS PIZZA!!! 😭

[@manujohn99]

😄😄😂

[@Zero1byZerodha]

He needs to "exercise" his pizza share 😂

[@deepaktips]

Govt doing the same with person's income

[@shubhamgujarathi2282]

Happy to see a bit advanced content (topic) by Zero1!

[@rvkay]

Okay . This is the best ESOP explainer

[@TheparimalSpiritual]

Bhai editing team ko salute he.....in your all videos editing level getting far batter than any KZbin channel......

[@Zero1byZerodha]

Thank you ❤️ team Zero1 FTW

[@ragragrec1]

excellently explained!

[@guha5080]

Thanks Zerodha…very entertaining and informative

[@shilpagupta2557]

Yet another brilliant episode

[@Zero1byZerodha]

Thank you for the love :)

[@RambhajanObama]

Esops De influenced. Video start here 2:41

[@avi_official]

Thanks

[@lakshmi1994-d4t]

Initial content is good too

[@alifepenneddown]

One thing you missed touching upon was - what happens when you leave company after exercising the stock options.

[@lakshmi1994-d4t]

You have to sell and encash. If it is retention or joining bonus and you are not completing the tineline. You won't get the stocks, it will be returned to the company

[@Zero1byZerodha]

If you have exercised your ESOPs, it means you own those stocks. So, if you leave after exercising, the stocks will still be yours and you can sell them if the company is public. But in other cases, there are different terms and conditions in different companies for selling the stocks. So, you will have to check this with your employer.

[@alifepenneddown]

@@Zero1byZerodha Thanks for sharing. I did clauses with mine but was mentioning that it is something which is important to know in the esop agreement

[@shiva2526]

Thanks. Understood what an ESOP is.

[@manishpatidar30777]

Please de-influence the new life style of running after everything, be it life goals, car, phones and what not that we run for, and why don't we like to stay calm and with peace with little we have and enjoying it and paying gratitude of it to god. Why everyone wants to make billions of dollars in a month or year or be a founder or be successful in just early 20's 25's. A genuine request to you to De influence today's mindset of different people and society!

[@TragicGFuel]

Shut it mate

[@sanketnegi1]

I have esops of my company and it is a startup.. company is doing decent.. hope it works out.

[@Zero1byZerodha]

All the best!

[@rockysage7760]

Wow thank you for this. Really appreciate it.

[@ram1mechrocker]

Excellent video kudos to the team!Also would like to know 1. what is a phantom unit in ESOPs? 2. If ownership is 50-50 and both take say 5% each and made a ESOPs pool of 10% then won’t it give a threat to one owner that if those 10% of employees get influenced with one owner then the other might loose control on board?

[@AbhijithRam-mz3yt]

Thanks for the nice explanation about ESOPs. Can we get a video on "PMS vs Mutual Fund" investments, pros and cons of selecting PMS rather than MFs. PMS in the sense not the SEBI regulated PMS which has minimum investment of 50l. This is understood as minimum ticket size itself is 50 lakhs which is not suitable for retail investors. But there are lot of IAPs (Intelligent Advisory Portfolios), kind of small PMS. Is it suitable for retail investors ? Advantages and dis-advantages of it over MFs, expected returns and risks. I guess this information might be helpful for retail investors. Thanks again.

[@Zero1byZerodha]

Thanks for the idea! Shared it with the content team :)

[@kannadacrisp999]

V.nyc explanation.

[@sonuroy2200]

great work Zerodha

[@samareshsamanta2863]

Eye opener

[@padmakumar3803]

Informative one

[@Snypter]

Spot on. Thanks

[@ron_fut_aldo5622]

Good episode

[@shaikmusadiq5538]

That's fantastic! Could you guys please de-influence courses under finance (abroad and domestic) and in what they specialize in? As an 18-year-old kid, it would help ^_^

[@Zero1byZerodha]

Can you give us an example?

[@shaikmusadiq5538]

@Zero1byZerodha definitely, like CFA, US CMA, CA, CS, CPF etc. What potential do these courses have in which field, perhaps it could be both in accounting and finance as well. Sometimes only in finance. I'm confused! 😅

[@bharathgopalakrishnan3739]

2 things ... 1. Where did you get that pizza ? 2. What work is your team involved in ?

[@Zero1byZerodha]

1. La pinnoz 2. Financial literacy :)

[@somendrasarkar1653]

Sir can you make a video on ESPP. Is it a wise choice? As per my understanding it's a good way if you are working in a relatable reputed company. Would love your analysis.

[@Zero1byZerodha]

Agreed. If your company is listed and you are getting a discount on ESPP, it could be a good investment. But if it's unlisted, ESPPs could be a little risky. So, make sure you are working in a really reputed unlisted company before buying the shares.

[@justforfun-Hakuna-Matata]

Great video! Using a pizza to explain how ESOPs works . Just a gentle reminder that many people face food insecurity around the world, so it's good to be mindful about how we use food in analogies. Thanks for the insightful content!😊😊

[@kaushikghosh8406]

Please also discuss about RSUs(Restricted Stock Units).

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price).

[@abhij2228]

Which company bro?

[@Ankhaunt]

Great informational video. How do one evaluate company's worth if it's a startup and not a listed company. how would I know that company's valuation increased or decreased in two years? Coz CEO or CFO won't share any data with the employees I guess.

[@Zero1byZerodha]

There's no single answer to this question. But here are a few things that you can check - Check if your company is in a growing industry. And whether the products/services they are offering are good or not. If they are good, then hopefully, the company's valuation will increase in the future. Also, make sure your in-hand salary is enough for your needs & you don't compromise it for more ESOPs.

[@awkbhi]

Can you please make a video on smallcase, something which is still new to large amount of equity investors.

[@Sylar1991]

Companies like Google don't have ESOPS. They give you standard stocks. Usually no cliff either, but a fixed vesting period. Also, almost every full time employee gets these.

[@riteshmohapatra]

pretty detailed insight..

[@Zero1byZerodha]

Thank you!

[@x1espmgnana_yoghi754]

My College class just started ESOPs

[@vsk.design]

🍕Perfect Analogy to explain the paper money scheme 😭

[@Zero1byZerodha]

Thank you for the love :)

[@reloaderify]

Please make a topic on Commodities and Options trading.

[@Zero1byZerodha]

Done. Coming up next friday 🤫

[@created4test]

Can you make a similar video on RSUs? please

[@manujohn99]

ESOP is a luxury than a basic need 🌝

[@vigneshwaran27334]

Think about a Nvidia employee who got Espos few years ago 😮

[@Zero1byZerodha]

Agreed, crazy!

[@bvsrevanth6856]

I read an article where 75% of the employees are millionaires now.

[@vishalpratap403]

Check about Wiz security. Just 4 years old company. Nvidia is way old company, people had RSU there. And RSU is not like ESOPs. Chances of people holding their old ESOPs till date is way way less. Wiz security was acquired by Google for 23 billing dollars. And because it's only 4 years old company, so employees who vested 100% ESOPs are millionaires in a day.

[@varunj2244]

Nvidia doesn't give ESOP, it gives ESPP. They're slightly different.

[@vivekpillay2821]

But they have to buy the shares first right , and they will need that much money , correct me if I am wrong, what if they don’t have that kind of money

[@calm2584]

so in case u can't liquidate your esops and u still exercised it with gains, u need to pay taxes even if there is no money in hand just some exercised esops?

[@manadaily]

Do video about RSU also

[@spp202]

You missed an important part, or maybe put up a separate video, about how to plan exercising the ESOP and selling/exiting. Like, exercise when price is low (since tax will be counted as per your tax slab, say 20% or 30%) and sell it at a higher price (obviously) after short-term period so that you pay only 10% on LTCG. e.g. if you exercise at 1L (at 20% slab) and sell at 2L, then Tax will be 30K (20K + 10K). But if you had exercised at 70K and sold at 2L, then tax would have been 27K (14K + 13K). Also, you have the option to offset LTCG with LTCL/STCL 🤷🏽‍♂️

[@Zero1byZerodha]

We wanted to keep things simple for this video so that people who don't understand ESOPs could know about it. But glad to know that the Zero1 community knows about these things :)

[@yasinbhojawala2430]

Next Video on RSUs please.

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price).

[@SagarVishwanath]

This like answering a 5 marks question with 3 cookies!

[@manoharbs]

ESOP in stratup is like e sweep your income 🙏

[@niravbharadiya2901]

How about difference between private company, based out of India vs out of India. Also, I understand the capital gain part of the ESOP, but how can there be an income tax on something that’s not liquid (the first allotment)

[@shrishabalkur1105]

What happens to the options if the employee leaves in between the exercising period and the time before the shares are transferred (assuming that the employee has subscribed to these options)?

[@Zero1byZerodha]

If you have exercised your ESOPs, it means you own those stocks. So, if you leave after exercising, the stocks will still be yours and you can sell them if the company is public or if a buyback happens. But there are different terms and conditions in different companies for selling the stocks. So, you will have to check this with your employer.

[@GokulP-f2u]

You could have explain how companies will give you the shares in your name when they are not listed publicly and what other benefits and right we do have regards to the company holding the share in our name.

[@Zero1byZerodha]

Can you please explain what do you mean by "shares in your name"?

[@skumar10176]

There is an option of ESPP where companies let employees purchase their stock on discount

[@mahinagrawal3824]

Hello, I have few questions 1. Is there any tax benefit for exercising the shares apart from the tax benefit by the difference of LTCG and STCG for foreign unlisted equities? 2. When the company goes IPO, do that still have to exercise my shares, and then get RSU for them?

[@danishsiddiqui2403]

How do the company decide the worth of esops. Is it based on the current valuation?.

[@Zero1byZerodha]

Yes that’s correct

[@syntaxandRender]

Koi ni jii noo book 9í boo i

[@musicsangram3637]

Is it same as RSUs?

[@dhaksjaj]

That man was sad Prateek sir😢😂

[@Zero1byZerodha]

😂😂

[@vijayritanshu]

23.5% of my CTC comes from ESOP and vesting is 1 year from now, I hope it’s good?

[@95ANDREWDAVID]

1. Difference between ESOP and ESPP 2. Are ESOPs and RSUs same or different?

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price). If your company is listed and you are getting a discount on ESPP, it could be a good investment. But if it's unlisted, ESPPs could be a little risky. So, make sure you are working in a really reputed unlisted company before buying the shares.

[@tarunjain361]

Hope to see A Rathod soon…somehow Prateek and Abhishek are like entwined twins. Tanya is doing good but still I feel Prateek do miss Abhishek.

[@shouvikdebnath1608]

In short, ESOPs are majorly a big no.

[@Zero1byZerodha]

The right company can create unimaginable wealth for team mates.

[@shouvikdebnath1608]

@@Zero1byZerodha true, however finding the right company is a challenge

[@Zero1byZerodha]

Agreed

[@SPR632]

Hello Zerodha team , could you please also explain CCD (Compulsorily Convertible Debenture(s)) and CSOP (Community Stock Options) ? Few companies offer CCD & CSOP through tyke invest.

[@ashwinikhanna]

Thanks,... very well explained !

[@Zero1byZerodha]

Glad it was helpful :)

[@ModiJiisking]

Jai hind ❤

[@pokepoke2327]

So sad to see abhishek go !!! RAISE DE DETE YAAR !!!!! 😅

[@annant05_]

Anything on private equity.

[@itsnotraunaq]

La Pino's 7 cheese pizza. Best had after your 7th drink. XD

[@losaal_lom-uu6mw]

😂😂😂😂😂😂😂

[@shivamanand8998]

Difference between ESOP, RSU, ESPP

[@IndianByHeart007]

after exercising esop, if I leave this company , then ?

[@Shubham_Toshniwal]

Please add the human-added caption like you always do for deaf viewers/subscribers like me. I don't believe the auto-generated caption because of its inaccuracy.

[@Zero1byZerodha]

Hi Shubham, can you DM us on Zero1’s Instagram? We’d like to get in touch with you. Fixing the captions too.

[@Zero1byZerodha]

Captions are now uploaded, hope this helps :) Thank you for bringing to our attention, worked on this immediately - Prateek

[@Shubham_Toshniwal]

@@Zero1byZerodha Thank you so much! I really appreciate your kind effort!

[@athuljeev4951]

Can you do a Top 5 episode of scams in india (r/w the amount money involved)

[@Zero1byZerodha]

Can you name a few scams that should be de-influenced?

[@hareeshs9773]

If 10 L ESOP grown to 20L, Is that vested 10L taxable? Or only the capital gain is taxable?

[@Zero1byZerodha]

Yes, you will have to pay tax on the vested 10L as per your income tax slab. And a capital gain tax on the remaining 10L (20L - 10L)

[@deepakgidwani3776]

So basically, if someone got offered 10 lakh rs worth of value esop today and then vesting start suppose of 3 year, so year by year, chunk by chunk he got something at the end of 3 year he can have access to that esops (means now he have to buy(excercise) it) and then he got the shares of that value then he have to pay tax on the value amount(senseless thing) and now the value become double and he sold(now again he have to pay tax (shit begins) ).

[@Zero1byZerodha]

Correct. However, if you exercise and sell the stocks at the same time (basically the value of the stock remains the same at the time of exercising and selling), you don't need to pay the capital gains tax. And since you are selling the stock, you won't have to pay the tax amount from your pocket. You can't directly give it from the money you make.

[@skumar10176]

RSUs is a synonym of ESOPs

[@anakingaming3687]

Bhai subh se bhuka hoga, garam garam pizza khane do, baad mei Microwave krke acha ni lagega

[@Zero1byZerodha]

😂😂

[@sowndharrajan6208]

Fresh works employees example got nearly crores from ipo

[@marvellouschandan]

Assume I have ESOPs worth 10 lakhs and I exercised it and paid the taxes of 3 lakhs. Now, think the company shuts down. I did paid 3 lakhs tax but got nothing. Why do I need to pay tax, while I earned just paper money.

[@Zero1byZerodha]

Many founders do the exercise and buyback at the same time so this issue doesn’t come up. But in your case, you have shares of a company that is growing and because you believed in it you exercised the options. As a team member I’m sure you can do a lot to grow the Co. What do you think?

[@mintaxis1433]

Instagram manager is getting 57 Lakhs p.a

[@reddygsreddy]

what about ESPP and RSUs?

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price). If your company is listed and you are getting a discount on ESPP, it could be a good investment. But if it's unlisted, ESPPs could be a little risky. So, make sure you are working in a really reputed unlisted company before buying the shares.

[@ShekarReddy-m6f]

@@Zero1byZerodha If it is foreign listed company the RSUs and ESPP are considered as foreign assets?

[@ShekarReddy-m6f]

@@Zero1byZerodha Thanks for the reply!

[@lastminutespecialist]

ask for Sodexo coupon instead

[@kallakurianirudh9055]

RSU vs ESOPS?

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price).

[@mehfoojahmed9471]

Bhai ka pizza thanda kar dia

[@massiah1298]

kya video composition hai...😂fire

[@29.shristirani54]

First here

[@avinashankur6228]

RSU and its taxation

[@Zero1byZerodha]

RSUs are quite similar to ESOPs. However, the main difference is that if your company gives you RSUs, after vesting, you will own the company stock for free. But in case of ESOPs, after vesting, you get an 'option' to buy the stock (at a discounted price). Both of them have the same taxation policy.

[@monjoynarayanchoudhury8008]

Just let him eat his pizza in peace man

[@aditya_samudra]

Now shoot the video again after 2024-25 budget changes in STCG, LTCG and Indexation 😅

[@Zero1byZerodha]

Arrey man 😑

[@amankhare7538]

It became little complex at last.

Sedha bhi bta skte the. Itna screenplay krne ki kya jarurat

[@amiirshad]

I have one question, can you make a video on it? I am having a two wheeler 150cc for 5+ years, and wish to upgrade it. But the upgrade is not necessarily to be done right now, can be postponed for 2 - 3 years. So is it a good idea to invest in automobile stocks the same money and use it 2-3 years later?

[@ankitvishal5805]

RSU's..... are also same kind of thing.. 😂😂 same concept vesting time..... but why we need to pay tax to foriegn and indian govt if that company is listed in USA (Nasdaq)...😢😢

[@anakingaming3687]

There is a double taxation treaty b/w US and India so you pay taxes at time of vesting to US and if capital gains are made those are paid in India. But you only pay once, when you get them. Also, you don't have to buy RSUs, ESOPs khareedna padta h. 200k k RSUs h MSFT k, puch lena aur koi doubt ho toh.

[@kakashi8203]

​@anakingaming3687 wait, I didn't understand the buying part. Say I have 10 lakh esop with vesting period of 1 year. Then after 1 year, I will GET the esop (meaning the shares of the comoany) right? What is this buying thing ?

[@marcusaureliusfanboy]

@@kakashi8203 Lets take the example in the video. You are offered ESOPs worth 30L vesting at 10L per year for next 3 years. After 1 year, 10L worth of esops get vested. Meaning you have an option to buy 10L worth of company's private shares. The buying price will be called the strike price/exercise price which mostly depends on the company's valuation. In future, if the price of the shares increase above the strike price, you can decide sell it during buybacks for the profit.

[@anakingaming3687]

@@kakashi8203 you get the ESOPs worth 10lac but whenever you want to sell in future or you exit the company. You need to pay some money per share called exercise price, see the video again, after vesting you get the right to exercise ESOPs but you can't sell them unless you pay that amount.

[@Zero1byZerodha]

You will get the option to buy the ESOPs after a year, but you will have to pay some amount (exercise price) to claim those stocks. The price is usually pretty low, like Rs 10 per share, but it could vary from company to company. Once you pay this amount, the ESOPs convert into stocks that you own.

[@tanusharmaaaaa]

13:37 kha ja bhai iss se phle dubara rok de

[@aruntripathi7669]

Why the hell music 🎶🎶 needed

[@Nothingxx-w6t]

Negotiation

[@atharvbhosale1574]

But sir, pizza to thanda ho gaya 😢

[@ankushchowdhury9377]

Second one

[@ritwek98]

7 cheeze pizza?

[@avanishexplorer]

Fun part is more boring... Make content sharp and up to the point

[@50karanbebale81]

How was the pizza 😂😂

[@Zero1byZerodha]

Pretty Good :)

[@theremoteman4504]

Bhai ko khalene do

[@Zero1byZerodha]

😂😂

[@gurpreetkakkar]

Very bad vedio, it was only for startup esop, not listed

[@mrdivy01]

Bruh:/

[@geek_for_life]

Deinfluencing Army 🪖