The Chennai/US-based Freshworks will offer 13.55 million shares of Class A common stock, par value $0.00001 per share from time to time to some of its stockholders, including directors, executive officers and current and former employees and third-party contractors and consultant (stockholders).
“We will not receive any of the proceeds from the sale of shares by the selling stockholders made hereunder. The shares were or will be acquired by the selling stockholders pursuant to our employee benefit plans,” the company said in a recent filing with the US SEC.
The underwriters have agreed that the conditions for early release of 20 per cent of the shares have been deemed satisfied as of October 27, 2021. Accordingly, Freshworks estimates that up to 58.2 million shares will become eligible for sale in the public market at the open of trading on November 4, 2021.
Sell-to-cover transactions
While the shares that were released on November 4 were based on 20 per cent 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).
“Our Section 16 officers, including co-founder Girish Mathrubootham, only have their required sell-to-cover transactions at this time, which will be reflected in their upcoming required filings with the SEC,” said a company official.
Freshworks’ CFO Tyler Sloat told analysts while discussing the company’s quarterly financial results said, “the one thing that we know will hit the market is just the sale recovers for tax purposes of restricted stock units and that should be executed.”
On October 29, Freshworks said that pursuant to the terms of the lock-in agreements, the restricted period will end with respect to either 20 per cent; 30 per cent or 40 per cent of the shares held by all holders of common stock and securities exercisable for or convertible into common stock if the last reported closing price of the Class A common stock on Nasdaq is equal to or greater than 110 per cent; 125 per cent or 150 per cent, respectively, of the IPO price of $36 per share. This is for any 10 out of 15 consecutive trading days ending on the one trading day prior to the second trading day after Freshworks’ public announcement of its earnings for the fiscal quarter ended September 30, 2021, including the last day of such 15-trading day period.
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