Rippling, the HR startup that recently conducted a massive tender offer sale, is allowing former employees to participate in the sale. However, there is a major exception—former employees who work for a few competitors are banned from selling their stock. Despite attempts by a small group of ex-employees to change this policy, Rippling has refused to alter it.
In addition, Rippling has informed employees who have previously sold shares, especially outside of previous tender offers, that they will not be authorized to sell as many shares this time around. This recent tender offer was the largest and most profitable for Rippling, valuing the company at $13.5 billion.
The rules for the offer were as follows: it was open to current and former employees, involved options rather than restricted stock units (RSUs), and allowed employees to sell up to 25% of their vested equity. However, any shares sold in the previous tender offer were included in the 25% count. Shares sold outside of a company tender offer would be double-counted against the 25%. Former employees working for competitors were not eligible to participate.
Rippling has excluded former employees who work for specific companies, including Workday, Paylocity, Gusto, Deel, Remote.com, Justworks, Hibob, and Personio. These employees only learned about their exclusion through word-of-mouth.
Deel, in particular, was not a surprise exclusion for former employees, as a post on Blind indicated. Some former employees who realized they were excluded wrote a letter to Rippling’s CEO and top lawyer, urging them to change their decision. However, Rippling refused to do so, leading to internal drama and scathing letters from both sides.
Rippling’s reason for excluding ex-employees at competitors is concern over sensitive information being shared with rivals. The company stated that it took a broad approach to the tender offer due to high demand, but excluded former employees who work at competitors aiming to build global HR and payroll products.
Rippling’s rivalry with Deel is a sensitive subject, as both companies market their tech stacks as superior to each other. Rippling’s CEO, Parker Conrad, is known for being competitive and has had previous conflicts with competitors during his time at Zenefits.
Excluding ex-Rippling employees working at competitors not only prevents them from profiting on their stock but also helps offset potential tax bills from exercising stock options. Rippling has tried to issue Incentive Stock Options (ISOs) to defer tax obligations for employees.
While all employees, whether current or former, will eventually be able to sell their stock after a lockup period following an IPO, it is unclear when Rippling will go public. Some impacted individuals are not just concerned about the money but also feel hurt by the implication that their former company believes they would engage in illegal or unethical activities.
