At December 31, 2020, under the 2010 Plan, 2011 Plan, 2012 Plan, and 2019 Plan (collectively, the “Plans”), the Company was permitted to grant stock options or RSUs for up to 14,901,474 shares of common stock, made up of 6,439,492 shares of Series A common stock and 8,461,982 shares of Series B common stock.

In June 2021, the Company’s board of directors approved an increase of 6,500,000 shares of Series A common stock authorized for issuance under the 2019 Founder Stock Plan and an increase of 1,200,000 shares of Series B common stock authorized for issuance under the 2011 Plan.

In August 2021, the board of directors approved the 2021 Incentive Award Plan, or the 2021 Plan. The plan became effective on September 28, 2021, the day prior to the Direct Listing of the Company’s Class A common stock, and the Company will no longer grant equity awards under any of the prior equity plans. Upon the 2021 Plan becoming effective, there were 11,076,515 shares of Class A common stock authorized under the 2021 Plan, and the remaining shares available for issuance under the prior equity plans were also made available for issuance under the 2021 Plan. The shares authorized under the 2021 Plan will increase annually, beginning on January 1, 2022 and continuing through 2031, by the lesser of (i) 5% of the then outstanding common stock, or (ii) a smaller amount as agreed by the board of directors.

The majority of RSUs issued by the Company prior to the Direct Listing vest upon the satisfaction of both a service and a performance condition. The service-based vesting condition is satisfied so long as the participant remains in service and employed by the Company as of each of the vesting dates. The performance condition was satisfied upon the Company’s Direct Listing on September 29, 2021, and 936,646 RSUs for which the service condition had previously been satisfied vested and were released to holders. RSUs granted subsequent to the Direct Listing vest upon the satisfaction of a service based vesting condition only. The Company will deliver one share of either Class A or Class B common stock, depending on the terms of the grant, for each vested RSU.

In June 2021, the Company granted performance stock units (“PSUs”) to the co-CEOs which vest upon two performance conditions, (i) a qualified public offering, which was satisfied upon the Company’s Direct Listing on September 20, 2021, and (ii) the price of the Company’s Class A common stock reaching stock price hurdles over a period of ten years, as defined by the terms of the award. If the PSUs vest, the Company will deliver one share of Class B common stock on the settlement date. Unvested PSUs expire in ten years from the date of grant. The terms of the PSUs granted are described further below.

In August 2021, the board of directors adopted and the stockholders of the Company approved the 2021 Employee Stock Purchase Plan, or the ESPP. The maximum number of shares of common stock which will be authorized for sale under the ESPP is equal to the sum of (a) 2,215,303 shares of common stock and (b) an annual increase on the first day of each fiscal year beginning in 2022 and ending in 2031, equal to the lesser of (i) 1% of the shares of the Company’s common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the board of directors; provided, however, no more than 16,614,772 shares of common stock may be issued under the ESPP.

Stock-based compensation expense consisted of the following for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Cost of goods sold	$	780	$	—	$	780	$	1
Selling, general, and administrative expenses	63,552		42,377		75,222		43,748
Total stock-based compensation expense	$	64,332	$	42,377	$	76,002	$	43,749

Stock-based compensation expense for the three and nine months ended September 30, 2021 includes $28.8 million related to the 2021 Founders Grant, as described below, and $25.3 million in connection with RSUs with a performance-based vesting condition that was satisfied by the Company’s Direct Listing. The nine months ended September 30, 2021 also includes $9.2 million of stock compensation expense related to the Tender Offer.

The three and nine months ended September 30, 2020 includes $41.7 million of stock-based compensation recorded in connection with shares held by employees that were sold to a third-party investor at the same time as our Series G redeemable convertible preferred stock issuance.

The fair value for options and share awards granted under the Plans are estimated at the date of grant using the Black-Scholes option-pricing model. No options were granted during the nine months ended September 30, 2020. The following assumptions were used for options granted during the three and nine months ended September 30, 2021:


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Risk-free interest rates	0.1	%	0.1% - 0.6%
Expected dividend yield	—		—
Expected term	0.25 years		0.25 - 6.25 years
Volatility	60	%	60	%

The risk-free interest rates were estimated based on the yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with terms consistent with the expected term of the option awards. The expected dividend yield is zero as the Company has never declared or paid cash dividends and has no plans to do so in the foreseeable future. The expected term is calculated using the simplified method using the vesting term of four years and the contractual term of ten years, resulting in a holding period of 6.25 years. Stock options expire ten years from the date of the grant. The volatility rate is determined based on an analysis of comparable public company historical volatilities adjusted based on the Company’s stage of development.

Because the Company’s common stock was not yet publicly traded when the options were granted, the Company estimated the fair value of common stock. The board of directors considers numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards are approved. The factors considered include, but are not limited to: (i) the results of contemporaneous independent third-party valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as a qualified public offering or sale of the Company, given prevailing market conditions; and (vii) contemporaneous transactions involving the Company’s common shares. The board of directors utilized third-party valuations which were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation.

A summary of stock option activity for the nine months ended September 30, 2021 is as follows:


	Number of Stock Options	Weighted Average Exercise Price		Weighted average contractual term	Aggregate intrinsic value





Balance at December 31, 2020	7,795,040	$	4.88	4.9	$	103,821





Options granted	1,226,277	20.20		—	—
Options exercised	(3,302,973)	7.47		—	101,332
Options forfeited	(5,214)	5.08		—	—
Balance at September 30, 2021	5,713,130	$	6.67	4.7	$	254,712

Exercisable as of September 30, 2021	5,713,130	6.67		4.7	254,712
Vested as of September 30, 2021	4,292,086	3.68		3.4	—
Unvested as of September 30, 2021	1,421,044	15.70		—	—

In August 2021, the board of directors approved a grant of 387,277 fully vested short-term options to purchase 40,766 of Series A common stock and 346,511 of Series B common stock, to certain directors and employees. The options have an exercise price of $24.53 per share and expire 90 days after the grant date. The Company recognized $6.8 million of stock-based compensation on the date of grant which represents the grant date fair value, as measured by the Black-Scholes model. The Company received $9.0 million in cash in connection with the exercise of these options through September 30, 2021.

A summary of RSU activity for the nine months ended September 30, 2021 is as follows:


	Number of Restricted Stock Units	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2020	1,493,122	$	13.14
Granted	3,089,923	33.67
Forfeited	(102,964)	15.05
Released	(1,064,858)	15.51
Vested and not yet released	(60,232)	35.26
Unvested as of September 30, 2021	3,354,991	$	30.84

The PSUs will only vest, if at all, in the event of (i) a qualified public offering and (ii) the price of the Company’s Class A common stock reaches stock price hurdles over a period of ten years. The qualified public offering criteria was satisfied with the Direct Listing. The PSUs are subject to the co-CEOs continued employment with the Company through the applicable vesting date. The PSUs are divided into eight substantially equal tranches, each one vesting on the date the 90-day trailing volume-weighted average trading price of our Class A common stock exceeds the stock price hurdle, as set forth in the table below, provided that no PSUs may vest prior to the six month anniversary

The Company used a Monte Carlo simulation to calculate the grant-date fair value of the PSUs of $128.8 million. Since the PSUs contain a performance and market condition, the stock-based compensation expense will be recognized when it becomes probable that the performance condition will be met using the accelerated attribution method. Stock-based compensation will be recognized over the period of time the market condition for each tranche is expected to be met (i.e., the derived service period). The performance condition was satisfied at September 29, 2021 by the Direct Listing, and the Company recorded $15.9 million of stock-based compensation expense related to the PSUs during both the three and nine months ended September 30, 2021.

The Founders Grant RSUs will vest in equal monthly installments over a period of five years, subject to the co-CEOs continued employment with the Company through the applicable vesting date and conditioned upon the completion of a qualified public offering. The grant-date fair value of the RSUs is $66.9 million. Since the RSUs contain a performance condition, stock-based compensation expense is recognized using the accelerated attribution method when it becomes probable that the performance condition will be met. The performance condition was satisfied at September 29, 2021 by the Direct Listing, and the Company recorded $12.9 million of stock-based compensation expense related to the RSUs during both the three and nine months ended September 30, 2021.

Shares underlying vested PSUs and RSUs will be issued to the CEOs on a specified quarterly date following the second anniversary of the vesting date, except for an amount necessary to cover any taxes due in connection with the vesting, which will be withheld or sold to cover, or issued to offset, such taxes. Any RSUs or PSUs subject to the award that have not vested by the tenth anniversary of the grant date will be forfeited.