CFO JOURNAL Duolingo Allows Employees to Sell a Portion of Their Shares Early The online language platform, which went public this week, joins a number of technology firms in letting its staff sell shares soon after listing, a deviation from the typical six-month lockup period The Duolingo owl and staff in Times Square. The company, whose stock started trading Wednesday, is allowing workers with vested shares to sell 25% of them in the first seven days. PHOTO: DUOLINGO By July 29, 2021 6:30 pm ET Language-learning platform Duolingo Inc. joined a group of companies that have allowed their employees to sell a portion of their shares soon after going public, easing the typical six-month lockup, its finance chief said. The Pittsburgh-based company, which offers digital tools for people to learn 40 different languages, listed on Nasdaq Wednesday after pricing 5.1 million shares at $102 each. The shares closed at $134.44 Thursday, down 3.29% from Wednesday’s close. Duolingo has an 180-day lockup period, but the company is allowing employees with vested shares to sell 25% of those in the first seven days of trading, Chief Financial Officer Matt Skaruppa said. They will also be allowed to sell shares toward the end of the 180 days, he said. The company declined to say how many shares are vested. NEWSLETTER SIGN-UP CFO Journal The Morning Ledger provides daily news and insights on corporate finance from the CFO Journal team. SUBSCRIBE “We wanted to give employees the chance to benefit financially early after the IPO,” Mr. Skaruppa said. In doing so, Duolingo, which went public in a traditional IPO, is borrowing from the playbook of direct listings, which usually don’t have lockups. The language school was also following in the footsteps of other tech companies, among them trading app Robinhood Markets Inc., data warehousing firm Snowflake Inc. and Airbnb Inc., all of which experimented with looser lockups when they went public. Robinhood shares began trading on Thursday. The concept of lockup periods was introduced around 30 years ago by banks that underwrote IPOs, and permitted few exceptions over the years, said Jeffrey Cohen, a partner in the capital markets practice of Linklaters LLP, a law firm. “The idea was to reduce any downward pressure on the stock price from selling and to limit the number of shares in the market, so that the offering price would prevail,” Mr. Cohen said. Lockups also were seen as signaling a commitment to the future of a company, he added. But a robust IPO and jobs market are changing that dynamic, Mr. Cohen said. “The pressure on companies to do well by their employees is as great as it has ever been,” he said. Going PublicInitial public offerings in the U.S. have surgedin recent months.Amount of money raised in U.S. IPOs duringthe first six months of the yearSource: Refinitiv billion2017'20020406080$100 Indeed, some banks now see early stock sales by employees as beneficial to the share price, as they can temper a first-day pop as well as even out a decline after 180 days, when many insiders look to sell their shares, Mr. Cohen said. A total of 215 companies listed in the U.S. during the first six months of this year, raising $85.76 billion, according to data provider Refinitiv. That amount was more than three times the total of the first half of 2020 and well above the same period of 2019, Refinitiv figures show. Founded in 2011, Duolingo has around 40 million monthly active users, some of them paying subscribers to its premium service. Duolingo said about half of its workforce of roughly 400 own vested shares. The company, which raised $521 million in its IPO, plans to spend some of it on research and development as well as on new hires. Mr. Skaruppa, who will be allocating the funds alongside the company’s existing cash, said Duolingo expects to recruit about 100 people by the end of this year. The company had about $117.5 million in cash and cash equivalents as of March 31, according to a filing with securities regulators. Mr. Skaruppa, who became CFO in February 2020, currently owns 114,811 shares alongside stock options, the company said in its filing. He won’t be able to sell stock early as easily as other employees, according to the filing. Write to Nina Trentmann at Nina.Trentmann@wsj.com