STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCKHOLDERS’ EQUITY

Common Stock

The Company has authorized the issuance of Class A common stock and Class B common stock. Holders of shares of Class A common stock are entitled to one vote per share, while holders of shares of Class B common stock are entitled to ten votes per share. Shares of the Company's Class B common stock are convertible into an equivalent number of shares of its Class A common stock and generally convert into shares of its Class A common stock upon transfer. The holders of Class A common stock and Class B common stock have no preemptive or other subscription rights and there are no redemption or sinking fund provisions with respect to such shares. Class A common stock and Class B common stock are referred to as "common stock" throughout these Notes to the Condensed Consolidated Financial Statements, unless otherwise noted. As of March 31, 2020, the Company was authorized to issue 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock, each with a par value of $0.0000001 per share. As of March 31, 2020, there were 359,142,301 shares of Class A common stock and 79,621,335 shares of Class B common stock outstanding. Options and awards granted following the Company's initial public offering are related to underlying Class A common stock.

Warrants

In conjunction with the 2025 Notes offering, the Company sold the 2025 warrants whereby the 2020 Counterparties have the option to purchase a total of approximately 8.26 million shares of the Company’s Class A common stock at a price of $161.34 per share. None of the 2025 warrants were exercised as of March 31, 2020 and expire on June 1, 2025.

In conjunction with the 2023 Notes offering, the Company sold the 2023 warrants whereby the 2018 Counterparties have the option to purchase a total of approximately 11.1 million shares of the Company’s Class A common stock at a price of $109.26 per share. None of the 2023 warrants were exercised as of March 31, 2020 and expire on August 15, 2023.

In conjunction with the 2022 Notes offering, the Company sold the 2022 warrants whereby the 2017 Counterparties have the option to purchase a total of approximately 19.2 million shares of the Company’s Class A common stock at a price of $31.18 per share. None of the 2022 warrants were exercised as of March 31, 2020 and expire on June 1, 2022.

Conversion of 2022 Notes

In connection with the conversion of certain of the 2022 Notes, the Company issued 1.1 million shares of Class A common stock in the three months ended March 31, 2020.

Stock Plans

The Company maintains two share-based employee compensation plans: the 2009 Stock Plan (2009 Plan) and the 2015 Equity Incentive Plan (2015 Plan). The 2015 Plan serves as the successor to the 2009 Plan. The 2015 Plan became effective as of November 17, 2015. Outstanding awards under the 2009 Plan continue to be subject to the terms and conditions of the 2009 Plan. Since November 17, 2015, no additional awards have been nor will be granted in the future under the 2009 Plan.

Under the 2015 Plan, shares of the Company's Class A common stock are reserved for the issuance of incentive and nonstatutory stock options (ISOs and NSOs, respectively), restricted stock awards (RSAs), restricted stock units (RSUs), performance shares, and stock bonuses to qualified employees, directors, and consultants. The awards must be granted at a price per share not less than the fair market value at the date of grant. Initially, 30,000,000 shares were reserved under the 2015 Plan and any shares subject to options or other similar awards granted under the 2009 Plan that expire, are forfeited, are repurchased by the Company or otherwise terminate unexercised, will become available under the 2015 Plan. The number of shares available for issuance under the 2015 Plan will be increased on the first day of each fiscal year, in an amount equal to the least of (i) 40,000,000 shares, (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year, or (iii) such number of shares determined by the administrator of the Plan. The administrator consists of the Board of Directors who then assigns the responsibilities to the Compensation Committee. As of March 31, 2020, the total number of shares subject to stock options, RSAs and RSUs outstanding under the 2015 Plan was 17,632,872, and 105,944,646 shares were available for future issuance. As of March 31, 2020, the total number of shares subject to stock options, RSAs and RSUs outstanding under the 2009 Plan was 15,171,723.

A summary of stock option activity for the three months ended March 31, 2020 is as follows (in thousands, except share and per share data):


	Number of Stock Options Outstanding	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Balance at December 31, 2019	23,619,804	$	12.66	4.89	$	1,191,746

Exercised	(3,396,568)	9.09
Forfeited	(20,135)	71.99
Balance at March 31, 2020	20,203,101	$	10.25	4.88	$	811,454



Options exercisable as of March 31, 2020	18,862,499	$	10.25	4.40	$	799,553

Restricted Stock Activity

Activity related to RSAs and RSUs during the three months ended March 31, 2020 is set forth below:


	Number of shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2019	13,917,461	$	49.90
Granted	863,415	69.78
Vested	(1,829,201)	35.56
Forfeited	(350,181)	46.05
Unvested as of March 31, 2020	12,601,494	$	53.43

Share-Based Compensation

The fair value of stock options and employee stock purchase plan rights are estimated on the date of grant using the Black-Scholes-Merton option valuation model. The fair value of RSAs and RSUs is determined by the closing price of the Company’s common stock on each grant date.

The following table summarizes the effects of share-based compensation on the Company's condensed consolidated statements of operations (in thousands):


	Three Months Ended March 31,
	2020		2019
Cost of revenue	$	76	$	21
Product development	57,400		42,649
Sales and marketing	6,407		6,202
General and administrative	13,420		12,216
Total	$	77,303	$	61,088

The Company recorded $4.7 million and $4.3 million of share-based compensation expense related to the Company's 2015 Employee Stock Purchase Plan during the three months ended March 31, 2020 and 2019, respectively, which are included in the table above.

The Company capitalized $2.3 million and $1.7 million of share-based compensation expense related to capitalized software costs during the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, there was $657.3 million of total unrecognized compensation cost related to outstanding stock options and restricted stock awards that are expected to be recognized over a weighted-average period of 2.7 years.