Stock-Based Employee Compensation

9 Months Ended

Sep. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Employee Compensation

9. Stock-Based Employee Compensation

Effective March 20, 2015, the Company adopted the ACV Auctions Inc. 2015 Long-Term Incentive Plan (the "2015 Plan"). Employees, outside directors, consultants and advisors of the Company were eligible to participate in the 2015 Plan. The Plan allowed for the grant of incentive or nonqualified common stock options to purchase shares of the Company’s common stock and also to issue restricted shares of the common stock.

Effective March 23, 2021, the Company adopted the ACV Auctions Inc. 2021 Equity Incentive Plan (the "2021 Plan"). The 2021 Plan became effective on the date of the underwriting agreement related to the IPO, and no further grants were made under the 2015 Plan. Employees, outside directors, consultants and advisors of the Company are eligible to participate in the 2021 Plan. The Plan allows the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and other forms of awards. As of September 30, 2022, 17,289,930 shares were available for future grants of the Company's common stock.

Effective March 23, 2021, the Company adopted the ACV Auctions Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"), which became effective on the date of the underwriting agreement related to the IPO. The 2021 ESPP authorizes the issuance of shares of the Company's Class A common stock pursuant to purchase rights granted to employees. As of September 30, 2022, 4,360,819 shares of the Company's Class A common stock have been reserved for future issuance under the 2021 ESPP. The price at which Class A common stock is purchased under the 2021 ESPP is equal to 85% of the fair market value of the Company's Class A common stock on the first or last day of the offering period, whichever is lower. The current offering period for the ESPP began on June 1, 2022 and will end on November 30, 2022. During the nine months ended September 30, 2022, 128,544 shares have been issued under the 2021 ESPP. As of September 30, 2022, unrecognized compensation expense related to the 2021 ESPP was $0.2 million and is expected to be recognized over the remaining term of the offering period.

The following table summarizes the weighted-average assumptions used in estimating the fair value of ESPP for the offering period beginning on June 1, 2022, using the Black-Scholes option-pricing model:
 

Expected term (in years)	0.5
Expected volatility	68.0	%
Risk-free interest rate	1.63	%
Expected dividend yield	0	%

The following table summarizes the stock option activity for the nine months ended September 30, 2022 (in thousands, except for share and per share amounts):
 

	Number of Options			Weighted- Average Exercise Price Per Share		Intrinsic Value		Weighted- Average Remaining Contractual Term (in years)
Outstanding, December 31, 2021		8,786,724		$	2.72	$	141,659		7.03
Granted		-			-
Exercised		(579,455	)		1.72
Forfeited		(230,119	)		5.96
Expired		(63,227	)		4.13
Outstanding, September 30, 2022		7,913,923		$	2.68	$	36,122		6.21
Exercisable, September 30, 2022		6,273,887		$	1.97	$	32,924		5.78
Expected to vest, September 30, 2022		1,640,036		$	5.40	$	3,198		7.85

The following table summarizes the restricted stock unit activity for the nine months ended September 30, 2022 (in thousands, except for share and per share amounts):

	Number of RSUs			Weighted- Average Grant-Date Fair Value
Outstanding, December 31, 2021		3,705,206		$	20.76
Granted		3,774,619			10.68
Vested		(784,557	)		19.83
Forfeited		(408,557	)		18.55
Outstanding, September 30, 2022		6,286,711		$	14.98

As of September 30, 2022 there was approximately $94.0 million of compensation expense related to the unvested portion of common stock options and restricted stock units that will be recorded as compensation expense over a weighted-average period of 2.73 years.

During the first quarter of 2022, the Company entered into an escrow agreement (the "Escrow Agreement") for certain compensatory share-based service awards. The Escrow Agreement authorized 620,877 shares of common stock to be issued and held in escrow. Shares will be released and distributed equally on a six-month schedule to the employee award recipients with the final vesting date on February 22, 2025. At September 30, 2022, there was approximately $6.3 million of compensation expense related to the unvested portion of escrow shares that will be recorded over 2.40 years.