SHARE BASED COMPENSATION

12 Months Ended

Dec. 31, 2020

15.	SHARE BASED COMPENSATION

The Company amended its 2009 share incentive plan (the “Plan”) in July 2019. Under the Plan, the Company may grant options, restricted share award (“RSA”), restricted share unit (“RSU”) or share appreciation right (“SAR”) to its officers, employees, directors and other eligible persons (collectively known as “Eligible Persons”) of up to 83,000,000 Class A ordinary shares. The Plan is administered by an authorized administrator appointed by the Board of Directors of the Company set forth in the Plan (the “Plan Administrator”).

The maximum number of shares which may be issued pursuant to all awards under the Plan will increase on January 1 of each of 2019, 2020, 2021 and 2022 by 5% of the total number of ordinary shares of all classes of the Company outstanding on that day immediately before such annual increase pursuant to the Plan. With effect on January 1, 2019, July 25, 2019, January 1, 2020 and January 1, 2021, the maximum number of shares which may be issued pursuant to all awards under the Plan increased to 100,129,938, 103,129,938, 123,292,170 and 148,888,743 Class A ordinary shares.

During the years ended December 31, 2019 and 2020, the Company granted 15,327,884 options, 6,249,313 RSUs and 82,722 SARs, and 5,809,024 options, 5,034,735 RSUs and 86,149 SARs, respectively to the Eligible Persons. All options granted have a contractual term of ten years. The options vest according to the stated vesting period in the grantee’s option agreement. The RSUs and SARs generally vest 25% on the first anniversary year from the stated vesting commencement date and the remaining 75% will vest in 12 substantially equal quarterly instalments.

(a)

Option granted to Eligible Persons

The following table summarizes the Company’s share option activity under the Plan:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate intrinsic value
				_$_		Years		_$_
Outstanding, January 1, 2018		11,653,513			5.11
Granted		26,500,000			15.00
Exercised		(2,117,647	)		2.16
Forfeited		(328,984	)		14.03
Outstanding, December 31, 2018		35,706,882			12.54		8.38		58,007
Vested and expected to vest at December 31, 2018		35,706,882			12.54
Exercisable as of December 31, 2018		8,748,351			5.25		6.03		56,918
Outstanding, January 1, 2019		35,706,882			12.54
Granted		15,327,884			15.00
Exercised		(3,736,976	)		5.58
Forfeited		(109,236	)		14.24
Outstanding, December 31, 2019		47,188,554			13.89		8.18		1,242,496
Vested and expected to vest at December 31, 2019		47,188,554			13.89
Exercisable as of December 31, 2019		19,664,736			12.35		7.35		548,035
Outstanding, January 1, 2020		47,188,554			13.89
Granted		5,809,024			18.59
Exercised		(5,486,180	)		11.29
Forfeited		(45,678	)		14.09
Outstanding, December 31, 2020		47,465,720			14.76		7.57		8,747,373
Vested and expected to vest at December 31, 2020		47,465,720			14.76
Exercisable as of December 31, 2020		25,298,368			13.73		7.03		4,688,260

The aggregate intrinsic value is calculated to be the difference between the exercise price of the underlying awards and the fair value of the underlying stock at each reporting date, for those awards that have an exercise price below the estimated fair value of the Company’s ordinary shares.

The Company calculated the estimated fair value of the options on the respective grant dates using the Black-Scholes option pricing model with the following assumptions.

	Granted in 2018	Granted in 2019	Granted in 2020

Risk-free interest rates	2.75% – 2.92%	2.34% – 2.68%	0.39% – 1.66%
Expected term	5 – 7 years	5.5 – 8.5 years	5.5 – 7.5 years
Expected volatility	33.3% – 35.2%	33.0% – 35.0%	32.4% – 33.7%
Expected dividend yield	–	–	–
Fair value of share options	$2.52 – $3.52	$4.58 – $13.59	$13.81 – $50.58

The Black-Scholes option pricing model was applied in determining the estimated fair value of the share options granted to Eligible Persons. The model requires the input of highly subjective assumptions including the estimated expected stock price volatility and the expected term of the option for which employees are likely to exercise their share options. The risk-free rate for periods within the contractual life of the option is based on the USD swap curve at the time of grant. The Company has used the simplified method to determine the expected term due to insufficient historical exercise data to provide a reasonable basis to estimate expected term. The Company’s management is ultimately responsible for the determination of the estimated fair value of its ordinary shares.

The aggregate grant date fair value of the outstanding options was determined to be $495,314 as of December 31, 2020 and such amount shall be recognized as compensation expenses using the straight-line method for all employee share options granted. The weighted-average grant-date fair value of share options granted during the years of December 31, 2018, 2019 and 2020 were $3.02, $12.05 and $37.86, respectively. The total fair value of share options vested during the years ended December 31, 2018, 2019 and 2020 was $22,390, $44,688 and $88,114, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2018, 2019 and 2020 was $20,660, $64,097 and $767,203, respectively.

As of December 31, 2020, there were $359,147 total unrecognized share-based compensation cost related to unvested options which is expected to be recognized over a weighted-average period of 1.92 years. Total unrecognized compensation cost may be adjusted for future changes in actual forfeitures.

(b)

RSAs/RSUs granted to Eligible Persons

The following table summarizes the Company’s RSAs/RSUs activity under the Plan:

	Number of RSAs/RSUs			Weighted average grant date fair value		Weighted average remaining contractual life		Aggregate intrinsic value
				_$_		Years		_$_

Unvested, January 1, 2018		820,207			14.43		9.60		10,933
Granted		4,983,162			12.30
Vested		(309,644	)		13.93
Forfeited		(738,753	)		13.75

Unvested, December 31, 2018 and January 1, 2019		4,754,972			12.34		9.17		53,826
Granted		6,249,313			20.50
Vested		(2,131,415	)		13.67
Forfeited		(791,433	)		15.22

Unvested, December 31, 2019 and January 1, 2020		8,081,437			18.02		8.93		325,035
Granted		5,034,735			72.37
Vested		(3,332,063	)		19.25
Forfeited		(442,181	)		28.74

Unvested, December 31, 2020		9,341,928			46.36		8.64		1,859,511

Share-based compensation cost for RSAs and RSUs is measured based on the fair value of the Company’s ordinary shares on the date of grant.

The aggregate grant date fair value of the unvested RSAs and RSUs as of December 31, 2018, 2019 and 2020 was $58,665, $145,597 and $433,085, respectively. These amounts are recognized as compensation expense using the straight-line method for the RSAs and RSUs. The weighted-average grant-date fair value of RSAs and RSUs granted during the years ended December 31, 2018, 2019 and 2020 was $12.30, $20.50 and $72.37, respectively. The total fair value of RSAs and RSUs vested during the years ended December 31, 2018, 2019 and 2020 was $4,314, $29,133 and $64,153, respectively.

As of December 31, 2020, there was $433,085 of unrecognized share-based compensation cost related to RSAs and RSUs which is expected to be recognized over a weighted-average vesting period of 3.31 years. Total unrecognized compensation may be adjusted for future changes in actual forfeitures.

Fair value of the SARs is measured based on the fair value of the Company’s ordinary shares at the end of each reporting period.

Total compensation expense relating to share options, RSAs, RSUs and SARs granted to employees after deducting forfeitures recognized for the years ended December 31, 2018, 2019 and 2020 is as follows:

	For the year ended December 31,
	2018		2019		2020
	_$_		_$_		_$_
Share options:

Cost of revenue		1,292		244		130
Sales and marketing expenses		795		156		69
General and administrative expenses		39,654		71,787		179,544
Research and development expenses		1,142		567		401
		42,883		72,754		180,144

Cash received for the exercise in the respective years		4,574		20,867		61,949

RSAs/ RSUs:

Cost of revenue		2,018		1,714		4,385
Sales and marketing expenses		1,899		3,017		10,100
General and administrative expenses		7,670		26,761		37,433
Research and development expenses		3,545		11,429		45,820
		15,132		42,921		97,738

SARs:

Cost of revenue		24		319		2,867
Sales and marketing expenses		52		749		5,462
General and administrative expenses		30		313		3,534
Research and development expenses		–		13		501
		106		1,394		12,364