26-Year-Old CEO Gives Away $11 Million in Shares

Thursday, May 14, 2015
Housing.com CEO Rahul Yadav (file photo: Mint)

One week ago, Housing.com co-founder Rahul Yadav denounced his investors as “intellectually incapable” in a resignation letter that he later hastily withdrew. The controversial entrepreneur is once again in the news because he has announced he would give his entire shareholding in the online property site to its 2,251 employees.

“I’m just 26 and it’s too early in life to get serious about money, etc,” Yadav said in a statement released by the company, adding that “every employee of Housing.com is now a company shareholder!”

According to the Financial Times, Yadav was only persuaded to stay at the start-up last week following “frank and healthy discussions” at a hastily convened board meeting, where he apologised for his “unacceptable comments” and pledged “full harmony” with investors.

Then on Wednesday, Yadav shocked the company by pledging to gift his 4.5 percent stake to employees, announcing it at a crowded employee meeting in a Mumbai hotel.

In effect, each Housing.com employee could receive the equivalent of a year’s salary in shares. However, it remains unclear if this gift has the backing of the board or how it will affect the long-term health of the company.

“I think it’s an impulsive decision by an immature person,” Mohandas Pai, an investor and tech entrepreneur, told the Financial Times.

The image of an inexperienced chief executive is held by many in the industry.

“Image is everything. Narayan Murhy giving away crores is seen as charity. Rahul Yadav giving away crores seems like foolishness,” tweeted Ajay Gahlaut, the executive creative director at Ogilvy and Mather.

SoftBank, the largest investor in Housing.com that led a $90m funding round for the company in December 2014, declined to comment.

Housing.com was once touted as the hottest campus startup to have emerged out of IIT-Bombay, but it has been marred by controversies for the past few months.

Some analysts see Yadav's move as a publicity stunt. Housing.com was valued at Rs 1,500 crore ($237 million) in December 2014, so his 4.5 percent stake would be worth Rs 70 crore ($11 million) and not Rs 150 crore-200 crore ($25 million) as claimed, according to NDTV.

Yadav’s decision highlights the arbitrary nature of India’s exuberant start-up scene, with record funds flowing into a sector populated with inexperienced owners of nascent tech companies.

According to Mint, Yadav is playing a high stakes poker game. Whether the Housing.com board approves his decision or not, it will endear the entrepreneur to his employees; this, in turn, will improve his bargaining power with investors, who over the past few months have considered removing the CEO they can’t seem to rein in.

- Karan Singh

To Learn More:

Indian start-up co-founder gives away $25m of shares (David Keohane and James Crabtree, The Financial Times)

Rahul Yadav’s stock gift to staff creates awkward dichotomy for Housing.com (by Mihir Dalal, Mint)

Why Rahul Yadav's Decision to Surrender Housing Shares Has Analysts Worried (by Varun Sinha, NDTV)

Housing.com CEO Rahul Yadav apologizes, withdraws resignation (Times of India)

Comments

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