Form 4: Duolingo Co-Founder Hacker Converts PSUs, Sells for Tax

Duolingo Co-Founder and CTO Severin Hacker converted performance-based restricted stock units and sold shares to cover tax obligations.

Summary

• Severin Hacker, Duolingo's Co-Founder, CTO, Director, and 10% Owner, converted 60,000 Performance-Based Restricted Stock Units (PSUs) into Class B Common Stock on February 17, 2026.
• Following this conversion, Hacker directly beneficially owns 270,000 PSUs and 207,787 shares of Class B Common Stock.
• Concurrently, 30,594 shares of Class B Common Stock were disposed of at a price of $112.57 per share to satisfy tax withholding obligations related to the PSU vesting.
• After the reported transactions, Hacker directly holds 177,193 shares of Class B Common Stock.
• Additionally, 2,836,917 shares of Class B Common Stock are indirectly held by the SBH Trust dated March 10, 2020, where Hacker serves as Trustee.
• The PSUs vest based on both continuous service as CTO (25% annually from the IPO anniversary) and Duolingo's Class A common stock achieving specific price hurdles over a ten-year period.
• Each share of Class B Common Stock is convertible into one share of Class A Common Stock at Hacker's option and automatically converts under certain conditions, including transfers (with exceptions), if Class B shares fall below 5% of total common stock, or upon Hacker's death.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a routine insider transaction involving the vesting of performance-based equity and a subsequent tax-related sale, which is a common occurrence and does not indicate a significant shift in company fundamentals or management's long-term outlook. The continued significant indirect holdings are positive.

Positives

• Conversion of PSUs indicates the satisfaction of vesting conditions, potentially including performance hurdles, which could be a positive signal for the company's stock performance.
• The reporting person, a key executive and co-founder, continues to hold a significant number of shares (over 2.8 million indirectly, plus direct holdings), indicating continued alignment with shareholder interests.

Negatives

• The sale of 30,594 shares, even if for tax purposes, represents a reduction in direct beneficial ownership.

Risks

• PSU vesting is contingent on Class A common stock achieving certain stock price hurdles over a ten-year period, meaning future stock performance is a risk factor for full vesting.
• The value of the Class B Common Stock, and thus the PSUs, is subject to market fluctuations of Duolingo's stock.

Future Outlook

The vesting of Performance-Based Restricted Stock Units is tied to Duolingo's Class A common stock achieving certain stock price hurdles over a ten-year period, indicating a long-term performance incentive for the CTO.

Industry Context

StockSavvy.ai notes that insider transactions, particularly those involving co-founders and CTOs, are closely watched for signals regarding management's confidence and long-term commitment. The conversion of PSUs and subsequent tax-related sales are common events for executives receiving equity compensation.

Comparison to Industry Standards

• The structure of performance-based restricted stock units (PSUs) with both service and performance conditions, including stock price hurdles over a multi-year period, aligns with common executive compensation practices in the technology sector, similar to those seen at companies like Google (Alphabet) or Meta Platforms, which use long-term equity incentives to align executive interests with shareholder value creation.
• The automatic conversion of Class B to Class A common stock under specific conditions (e.g., transfers, ownership thresholds, death) is a standard dual-class share structure mechanism, often employed by founder-led tech companies to maintain control, comparable to structures at companies like Snap Inc. or Zoom Video Communications.
• The disposition of shares to cover tax liabilities upon vesting is a routine and expected event for equity compensation, consistent with practices across publicly traded companies.

Related Party Transactions

• Shares are indirectly held by the SBH Trust dated March 10, 2020, of which Severin Hacker is Trustee, indicating a related party holding.

Stakeholder Impact

• Shareholders: The transaction reflects a routine executive compensation event. The co-founder's continued significant ownership, both direct and indirect, aligns his interests with long-term shareholder value. The performance-based vesting conditions tie executive compensation to stock performance.
• Employees: The CTO's continued service and equity incentives may signal stability in leadership.

Next Steps

• Continued service as CTO for future PSU vesting.
• Achievement of Duolingo's Class A common stock price hurdles for full PSU vesting over the next ten years.
• Settlement of vested PSUs by issuance of Class B Common Stock on the first anniversary of vesting.

Key Dates

Recommendation

This Form 4 filing details a routine insider transaction where a co-founder and CTO converted performance-based restricted stock units and sold a portion to cover tax liabilities. Such transactions are common and generally do not signal a change in the company's fundamental outlook or the executive's long-term commitment, especially given the substantial remaining direct and indirect holdings. Therefore, a "hold" recommendation is appropriate as this filing alone does not present new information warranting a change in investment thesis.

Keywords

Duolingo, DUOL, Severin Hacker, Form 4, SEC filing, insider transaction, restricted stock units, PSUs, Class B Common Stock, executive compensation, beneficial ownership, stock sale, tax withholding