This information is with regards to the ‘early lock-up release’ structure shared in our earlier communications and in our S-1/A filed in September 2021. The ‘early lock-up release’ was based upon achieving certain price targets over a specified period, around the timing of our first earnings release as a public company on November 2, 2021. On November 4, 2021, the Company released shares to current and former employees based on approximately 20% of ‘outstanding awards.’
Outstanding awards are calculated as:
- Options: shares issuable upon exercise of options (unexercised options) PLUS
- Unreleased RSUs (vested + unvested)
A number of shares equal to 20%, 30%, or 40% of your shares, to the extent vested, would be released from the lock-up restrictions if the last reported closing price of the company’s Class A common stock on Nasdaq is equal to or greater than $39.60, $45.00, or $54.00, respectively, for
at least 10 out of 15 consecutive trading days ending on the second trading day after the Earnings Release Date.
If the conditions described above (the “early lock-up release conditions”) are not met, then your shares will not be released from the lock-up restrictions until the earlier of (i) the opening of trading on the second trading day after Freshworks announces earnings results for the quarter ending December 31, 2021 (which we anticipate would be sometime in February 2022) and (ii) the close of business on March 22, 2022.
Prior to the closing of the IPO, Freshworks put in place two classes of common stock: Class A and Class B. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting rights. For any matter that is submitted to a vote of Freshworks’ stockholders, holders of Class A common stock are entitled to one vote per share and holders of Class B common stock are entitled to 10 votes per share. While 10 votes per share sounds like a lot, the company’s voting control is already concentrated in Freshworks’ executive officers, directors, and largest investors.
Freshworks’ Class A common stock is traded on the Nasdaq Stock Market, but the Class B common stock will never be publicly traded. All shares you currently hold are Class B common stock, and cannot be traded or sold unless they are converted to Class A common stock prior to such sale. The conversion is 1:1; meaning, for every share of Class B common stock converted, you will receive one share of Class A common stock.
Class A Shares - Vested RSU awards outstanding
Generally, 20% of outstanding awards, to the extent vested, were released from the lock-up restrictions. With respect to the RSUs released, they are immediately subject to compensation income reporting and tax withholding in connection with the settlement of such RSUs. In certain cases, due to a system limitation, more than 20% was released.
What is the process for the early lock-up release and how will Freshworks withhold the relevant tax amounts? Do I have to do anything as part of the sell-to-cover?
In order to satisfy your tax withholding requirements E*Trade will sell a portion of your shares under a “sell-to-cover” transaction pursuant to your stock agreement. You do not have to do anything personally on the sell-to-cover trade, however, you do NEED to activate your E*TRADE account and certify your W-8BEN form during the activation process.
Your RSU shares subject to the early lockup release are valued based on the closing stock price of ‘FRSH’ on the Nasdaq on November 3, 2021, which is $43.06.
The value of your RSU shares is considered compensation income and subject to income reporting and tax withholding. This means, Freshworks is required to report income from the RSU release and remit withholding taxes due to the appropriate regulatory tax agencies.
In order to satisfy an employee's obligation to pay taxes, the Company used a “sell-to-cover” method. A sell-to-cover transaction is where a broker, in this case E*Trade, is directed to sell a portion of your vested shares on the open market, and the sale proceeds are applied to your tax withholding obligation. The remaining shares are then deposited into your account.
More questions? Contact firstname.lastname@example.org
An Example of how the sell-to-cover works:
Calculation of income and taxes due based on 100 RSUs:
Closing price of FRSH stock on November 3, 2021: $43.06
Compensation income subject to tax withholding: $4,306.00 (100 shares X $43.06)
Assumed Tax rate (hypothetical): 39%
Tax amount due from individual: $1,679.34 ($4,306.00 x 39%)
E*TRADE executed the sale of a portion of the vested shares to cover $1,679.34 taxes due and any applicable trading commission and fees. At the market prevailing rate (assumed $38.3722), it was determined that 44 shares needed to be sold as follows:
Proceeds from the sale of 44 shares @ $38.37220 execution price - $1,688.38
Minus: Tax amount due from individual - ($1,679.34)
Minus: Fees - ($3.48)
Excess proceeds - $5.56 (this amount will be in your E*Trade account)
$38.37220 execution price - When E*Trade sells shares to cover taxes, it does so in the market at prevailing market prices, which fluctuates constantly during the day. E*Trade sold stock subject to sell-to-cover over November 4 and 5th, and the price per share was between approximately $37 and $39 per share.
In our example, E*TRADE sells 44 of your vested RSUs (44 shares x $38.37220 assumed stock price at time of sale = $1,688.38) to cover the $1,679.34 tax withholding obligation and fees. Any overage ($5.56) remains in your E*Trade account. You will then retain 56 shares (100 vested shares - 44 shares sold to cover his tax withholding obligation = 56 shares).
Note: The sale of the 44 vested shares at a price ($38.37220) lower than the adjusted cost basis ($43.06) results in a short-term capital loss. For general tax information, please visit.
If you are a former Freshworks employee, we can help facilitate the transfer of your shares to E*TRADE but you will first need to convert your Class B common stock into Class A common stock by submitting this share conversion form to email@example.com. The conversion and transfer of shares will take approximately 3-5 business days to complete.
Investor Centre New User Login Instructions
You can submit an online inquiry or direct your inquiries and transaction requests to Computershare using the options below:
Telephone inquiries: +1 (781)575-3100 or 1-800-736-3001
E-mail inquiries: firstname.lastname@example.org
P.O. Box 505000
Louisville KY 40233-5000
By Overnight Delivery:
462 South 4th Street, Suite 1600
Louisville KY 40202
There is an important step you need to take as a non-US person receiving equity in an E*TRADE account. It’s called certifying your W-8BEN status. In simple terms, because you live outside of the United States and are potentially receiving income from a US source, the US Internal Revenue Service (IRS) requires E*TRADE to ask you to complete the Form W-8BEN so they can learn more about your tax status.
Failure to certify may result in US backup withholding tax of 24%. This will result in E*TRADE selling additional shares from your account to satisfy the US IRS requirement.
See below for two options on how you can submit your Form W-8BEN information and related additional notes.
IMPORTANT: Even if you already certified your Shareworks account, you are STILL required to submit a new Form W-8BEN at E*TRADE. Be sure to include the required documentation identified below to certify your foreign tax status.
What to know before you begin:
• You must have updated personal information, including address, on file with E*TRADE before you begin the W-8BEN certification process. If you need to update your address, click the “Profile” icon in the upper-right corner of the page, choose “Account Preferences,” and enter your correct address.
Option 1: Submit your Form W-8BEN online:
• Log on to your account at etrade.com and you should see a prompt to certify your W-8BEN status.
• Click the purple “Certify” button and follow the step-by-step instructions. If you need help, you can also watch the W-8BEN certification video.
• Provide your legal name, date of birth, and foreign tax identification number (FTIN) and verify your address. If you cannot provide an FTIN, you must submit a reasonable explanation as part of the W-8BEN submission process.
• For certain situations, additional documentation may be requested at the conclusion of the certification questionnaire. At that point, you'll be prompted to upload the required documents. Click the “Upload” button to submit. If you don't have all the required documents when completing the W-8BEN, you will have an opportunity to upload the documents the next time you log on, or you can visit documentupload.etrade.com.
• If you have any questions on updating your personal information, please visit etrade.com/contact for your country’s toll-free number, or call us at +1 650 599 0125, 24 hours a day, weekdays. You can also log on to your account and chat with us.
Option 2 : If you are unable to certify online:
• Complete an original signed Form W-8BEN. If you do not have a FTIN, you must explain why on Form W-8BEN. You can download and print Form W-8BEN here.
• Provide any additional documentation that may be required, such as a copy of a valid government ID or passport showing citizenship status.
• Submit the completed form and required documentation to E*TRADE. The documents can be either securely uploaded at documentupload.etrade.com OR mailed to:
E*TRADE Securities LLC,
P.O Box 484,
Jersey City NJ 07303-0484
Additional important notes:
• IF YOU ARE A US CITIZEN OR RESIDENT ALIEN, please instead complete a Form W-9 available at etrade.com/taxforms, and provide a copy of a Social Security card, and a signed and dated letter explaining the change from foreign to domestic tax status and submit all documentation following the instructions in the second bullet of Option 2 above.
• If your government ID or passport was issued more than three years ago or the citizenship on your government ID or passport does not match the country of permanent residence address or mailing address on your account, please provide a utility bill or bank statement dated within the past six months that clearly shows your permanent residential address.
For questions about the certification process or US backup withholding tax, contact your tax advisor, or visit the IRS website at irs.gov. Instructions for Form W-8BEN can be found in IRS Publication 515 ("Withholding of Tax on Nonresident Aliens and Foreign Entities"). Once US backup tax is withheld, you may need to work with the IRS to obtain a refund.
For assistance with your E*TRADE stock plan account, please visit etrade.com/contact for your country’s toll-free number, or call us at +1 650 599 0125, 24 hours a day, weekdays. You can also log on to your account and chat with us.
If you have any additional questions, please contact email@example.com
Log in to E*Trade
Follow this path:
> Stock Plan > Holdings >
Click on each Grant dropdown arrow
Navigate and click on each grant “View Confirmation of Release.”
The “Confirmation of Release” Statement will provide detailed information related to each tranche released from a grant. Please make sure to click on each grant to see all your released stock. This is an example for illustrative purposes only.
Am I able to sell my shares that become available in my E*Trade account?
Yes. Your net shares are now reflected in your E*Trade account, and you may choose to sell or hold these shares.
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