Careem has told its former employees that they’ll have to take a 25 percent cut in the value of their vested options if they decide to cash them out when Uber’s $3.1 billion acquisition of Careem closes (expected January 2020). In an email (seen by MENAbytes) that Careem has sent to all its former employees yesterday (Nov 12, 2019) who had stock options, Careem has given them two choices wrapped in sugarcoated words without a lot of details:
Choice 1: become a shareholder in Careem and receive timetabled payments commencing with 75% on or around deal close, and 25% over the following 30 months.
Choice 2: do not become a shareholder in Careem and receive a single cash payment amounting to 75% of the value of your vested options as agreed in the deal (ie. 75% of around $51.86 on a per-share basis). This is the default setting if you do not make a choice.
To put it in simple words, Careem is telling the former employees many of whom are set to become millionaires after receiving this money that they can either forget 25 percent of the value of their vested options (which is the default option in case they don’t make a choice) or choose the complicated longer-term payment structure.
The Dubai-headquartered company has labeled this a great outcome in the email, “We believe this revision to the options agreement is a great outcome for Careem and all our colleagues. Thank you for your continued support.”
The email also notes that Careem would need at least two weeks to respond to any questions they receive regarding this.
The email by Careem explains that a detailed legal packet containing the breakdown of payments and timing has been prepared and will be shared with these former employees shortly. The former employees that we’ve spoken to have not received those details yet but MENAbytes has been able to get a copy of the slides with payment breakdown and details.
According to the slides seen by MENAbytes, those former employees who go with the first option will be paid 45 percent of their stock options (at around $51.86) on closing of the deal (expected January 2020) in cash with additional 30 percent to be issued as notes at around $51.86 and payout after 90 days, 10 percent after 18 months and up to 30 months (July 2021) in notes at around $51.86 (payout after 90 days) and the rest of 15 percent after 21 months (October 2021) as notes at around $51.86.
The company has also made some changes for current employees. They’ve also been given two choices but if they decide to cash out immediately, they’ll lose less than six percent of the value of their options, unlike the former employees who will lose 25 percent.
Careem has declined our request for a comment so it’s not clear why the company is doing it but one reason could be that there are cash issues. Uber had announced two months ago that it is looking to raise $750 million in debt financing to fund its purchase of Careem.
Former employees feeling deceived
Alpha*, a former Careem employee, speaking to MENAbytes about these revised terms said that they’re feeling cheated, “We are feeling powerless and at the mercy of whatever they decide. The question is summarized as “take 75% of what you earned, or take a staggered longer-term payout where you’ll still be at the mercy of their continuous change.”
“All the former colleagues I’ve spoken to feel cheated and deceived. Of course, they are not surprised as it is clear Careem’s brand and positioning of a “good guy” and people-first organization is a constructed PR facade,” Alpha* added.
Alpha* further explained the structure s/he learned about deprioritizes former colleagues, “These former employees are the ones who are actually the ones who built the company. Employees like me who were there early and scaled the business to where it is. A time when salaries were pretty bad and work was incredibly demanding and 24/7. Current employees are now favored and the fact that there is a difference between former and current is actually immoral. We gave the company our 200 percent and what we are getting in return is 75 percent.”
Alpha* also said that legal action is being explored but there’s nothing official yet, “I am also exploring.”
Beta, another former Careem employee, speaking to MENAbytes said, “How could they just send it so nonchalantly. We are outraged to receive it and to have it so poorly put together. The email was out of nowhere, it had no terms and conditions attached to it. All the colleagues [I have spoken to] are unbelievably surprised, outraged and disappointed to think that Careem is trying to choose a way worse option for them. Could this be Uber’s influence? Old Careem would have never done this.”
“Careem’s default option, if you do not respond to them, is to strip you of 25% of [value of] your earned equity – which is unacceptable,” s/he added.
Beta also said that s/he has responded to the email requesting more details, “Several former Careem employees have also responded back to this abrupt and terribly written email and inquiring details to learn what it means for them.”
*Names of the employees we’ve spoken with have been changed to protect their identities on their request.