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Redeemable Convertible Preferred Stock and Stockholders' Equity
 9 Months Ended
Sep. 30, 2024
Equity [Abstract]  
Redeemable Convertible Preferred Stock and Stockholders' Equity Redeemable Convertible Preferred Stock and Stockholders’ Equity
On April 22, 2024, the Company closed its IPO, in which we issued and sold 2,500,000 shares of our Class A common stock at the IPO price. The Company received net proceeds of $198.0 million after deducting underwriting discounts and commissions of $13.2 million and offering costs of approximately $8.8 million. The Selling Stockholders offered an additional 4,060,700 shares of the Company’s Class A common stock at the IPO price in a secondary offering, for which the Company received no proceeds. In connection with the secondary offering, on April 25, 2024, the underwriters for the IPO exercised their option to purchase an additional 984,105 shares of the Company’s Class A common stock from the Selling Stockholders at the IPO price less underwriting discounts and commissions, with all proceeds going to the Selling Stockholders.
In connection with the IPO, on April 22, 2024, the Company filed an amended and restated certificate of incorporation (Restated Certificate). Immediately prior to the effectiveness of the Restated Certificate, all 17,245,954 outstanding shares of redeemable convertible preferred stock automatically converted into an equal number of shares of the Company’s common stock, which were then reclassified into an equal number of shares of the Company’s Class A common stock. In connection with the filing of our Restated Certificate, 9,511,741 shares of the Company’s common stock were reclassified into an equal number of shares of the Company’s Class A common stock. Immediately following the effectiveness of the Restated Certificate and common stock reclassification, 3,668,427 shares of the Company’s Class A common stock outstanding and beneficially owned by Bryan Leach, Chief Executive Officer and President, and certain related entities, were exchanged for an equivalent number of shares of the Company’s Class B common
stock. Concurrently upon the closing of the IPO, the $75.1 million of convertible notes automatically converted into 1,177,087 shares of the Company’s Class A common stock.
Upon the completion of the IPO and filing of the Restated Certificate, the Company’s authorized capital stock consists of 3,000,000,000 shares of the Company’s Class A common stock, par value $0.00001 per share, 350,000,000 shares of the Company’s Class B common stock, par value $0.00001 per share, and 100,000,000 shares of preferred stock, par value $0.00001 per share.
Redeemable Convertible Preferred Stock
As of September 30, 2024, there were no shares of redeemable convertible preferred stock issued and outstanding.
Preferred Stock
As of September 30, 2024, there were no shares of preferred stock issued or outstanding.
Common Stock
The rights of the holders of the Company’s Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of the Company’s Class A common stock is entitled to one vote per share and is not convertible into any other shares of the Company’s capital stock. Each share of the Company’s Class B common stock is entitled to 20 votes per share and is convertible at any time into one share of the Company’s Class A common stock.
The Company had shares of common stock reserved for issuance as follows:
September 30, 2024December 31, 2023
Redeemable convertible preferred stock outstanding—17,245,954
Stock options outstanding3,688,7524,516,612
Restricted stock units outstanding1,148,327—
Restricted stock purchase37,192113,846
Common stock warrant4,121,0343,528,577
Remaining shares reserved for future issuances under equity incentive plans4,271,356569,736
Remaining shares reserved for future issuances under the 2024 Employee Stock Purchase Plan715,000—
Total shares13,981,66125,974,725
Restricted Stock Purchase
On February 9, 2021, the Company granted an officer of the Company the right to purchase 408,824 shares of restricted common stock, and the officer exercised the purchase option at the grant date fair value of $8.30 per share, for a total exercise price of $3.4 million (restricted stock purchase). As the restricted stock purchase contained a repurchase option for the Company, the exercise price was initially recognized as a deposit liability that is offset to additional paid in capital as the repurchase option is released. One quarter of the shares were released from the Company’s repurchase option on the one-year anniversary of the grant, and one forty-eighth of the shares are released monthly for the 36 months thereafter.
As of September 30, 2024, $3.1 million had been released from the Company’s repurchase option and recorded to additional paid in capital. The portion of shares to be released from the repurchase option in the next 12 months, recorded in other current liabilities, is $0.3 million. As of December 31, 2023, $2.4 million had been released from the repurchase option and recorded to additional paid in
capital, $0.8 million was recorded in other current liabilities, and the remainder of $0.2 million was recorded in other long-term liabilities.
Common Stock Warrant
On May 17, 2021, the Company issued the Walmart Warrant in connection with a multi-year strategic relationship that makes Ibotta the exclusive provider of digital item-level rebate offer content for Walmart U.S. (Commercial Agreement). The Walmart Warrant was issued in exchange for access to Walmart consumers and is accounted for under ASC 718, Compensation–Stock Compensation (ASC 718), as a share-based payment to a nonemployee in exchange for services to be recognized in the same manner as if the Company paid cash for the services.
Pursuant to the terms of the Walmart Warrant, Walmart has the right to purchase up to 3,528,577 shares of the Company’s common stock, subject to a non-discretionary anti-dilution provision, at an exercise price of $70.12, subject to decreases in the event of an initial public offering, a change in control, a direct listing, or a special purpose acquisition company transaction (i.e., liquidity event), if certain pricing thresholds were not met. In accordance with the non-discretionary anti-dilution provision, prior to the consummation of the IPO, the number of shares exercisable increased by an amount equal to 12.4% of the total increase of the Company’s fully diluted capitalization since issuance. The Walmart Warrant shares increased by 592,457 shares to a new total of 4,121,034 shares.
Vesting of the Walmart Warrant is subject to certain conditions, including the achievement of certain milestones and satisfaction of obligations of both parties, or (with respect to 1,648,413 of such shares after the anti-dilution adjustment) the passage of time after the achievement of certain milestones, subject to acceleration if certain operating goals are achieved. Failure to satisfy these conditions or termination of the Commercial Agreement would result in a decrease in the number of shares vesting under the Walmart Warrant. The Walmart Warrant expires, and any vested warrants are no longer exercisable, effective May 17, 2031, or May 17, 2028 in certain cases if the Commercial Agreement is no longer in effect.
The grant date (measurement date) of the Walmart Warrant is May 17, 2021, which is the date of the Commercial Agreement. The aggregate grant date fair value of the Walmart Warrant was $35.3 million. To factor in the various terms and conditions of the Walmart Warrant, including the potential adjustments if certain pricing thresholds were not met upon an initial public offering or other liquidity event (i.e., considered a market condition), the fair value was determined based on probability weighted estimated fair values determined under both a Black-Scholes option pricing valuation model (assuming no liquidity event) and a Monte Carlo simulation valuation model (assuming a potential liquidity event) with the following assumptions:
Black-Scholes Option Pricing ModelMonte Carlo Simulation
Risk-free interest rate1.64 %1.64 %
Expected dividend yield——
Expected volatility50 %
50% / 65%
Expected term (in years)10.010.0
The adjustment under the anti-dilution provision on April 22, 2024 represents a modification under ASC 718. The aggregate grant date fair value of the 592,457 additional shares granted under the anti-dilution provision is $37.2 million. The fair value was determined based on a Black-Scholes option pricing
valuation model with the following assumptions:
Black-Scholes Option Pricing Model
Risk-free interest rate4.61 %
Expected dividend yield—
Expected volatility65 %
Expected term (in years)7.1
The fair value of the portion of the Walmart Warrant that vests upon achievement of the performance conditions is recognized as sales and marketing expense when the performance conditions are considered probable of achievement, and the fair value of the remaining portion is recognized as sales and marketing expense over time beginning upon achievement of certain performance conditions through the remainder of the Commercial Agreement term, subject to acceleration if certain operating goals are achieved, and subject to certain forfeiture and repurchase terms.
In September 2023, the performance conditions required for vesting were deemed probable, and the Company began to recognize stock-based compensation expense. During the three and nine months ended September 30, 2023, we recognized stock-based compensation of $9.1 million in sales and marketing expense associated with the Walmart Warrant. During the three and nine months ended September 30, 2024, we recognized stock-based compensation of $2.2 million and $27.1 million, respectively, in sales and marketing expense associated with the Walmart Warrant. Included in the $27.1 million was a $17.5 million incremental expense adjustment for the anti-dilution provision modification upon IPO. All expense for the periods presented is related to the vesting of the service conditions.
Stock-based compensation expense yet to be recognized related to the unvested portion of the Walmart Warrant is $32.3 million as of September 30, 2024. This amount is expected to be recognized over a weighted average period of 4.0 years.
Share Repurchase Program
On August 22, 2024, the Company announced that its board of directors approved a share repurchase program, with authorization to purchase up to an aggregate of $100 million of the Company’s Class A common stock (Share Repurchase Program). The Share Repurchase Program has no expiration date. Repurchases under the Share Repurchase Program may be made from time to time through open market repurchases or through privately negotiated transactions subject to market conditions, applicable legal requirements, and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended (Exchange Act). The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of shares of its Class A common stock under this authorization. The Company is not obligated under the Share Repurchase Program to acquire any particular amount of Class A common stock, and the Company may terminate or suspend the Share Repurchase Program at any time. The timing and actual number of shares repurchased may depend on a variety of factors, including price, general business and market conditions, and alternative investment opportunities.
During the three months ended September 30, 2024, the Company repurchased 274,902 shares of its Class A common stock for an aggregate repurchase amount of $15.7 million, inclusive of immaterial broker commissions and legal costs. Repurchases are reflected in treasury stock on the condensed balance sheets. As of September 30, 2024, $84.4 million remains available and authorized for repurchase under the Share Repurchase Program. Activity under the Share Repurchase Program is recognized in the condensed balance sheets on a trade-date basis.