Dear Jeremy
Very well said.
Stock based compensation (SBC) is the most abused aspect of corporate finance today.
Its origins lie in sweat equity paid by boot-strapped start-ups, where a share in the business was given in lieu of cash remuneration due to cash flow constraints.
However, today, SBC has morphed into something quite different. It is paid in addition to very generous cash salaries and is tantamount to a transfer of wealth from shareholders to insiders.
Contrary to the excuses given for making SBC awards, it does not align interests with investors – in fact quite the opposite is true. More particularly, stock repurchases to offset dilution erode shareholder equity and distort the market.
Meanwhile, the regulator seems to have been asleep at the wheel.
We have just released a podcast to reveal the extent of SBC abuse in the market: https://rockandturner.substack.com/p/podcast-serious-bleed-on-capital
Please share this because many investors are unaware of the issue and unless shareholder make a stand, nothing will change.
Best regards
James
Can you say “skewered”? In inimitable Raper Capital form!
haha thank you Whirly. this one is fully deserved, though. i am working on getting the FT to pick up the story and run with the ball, fingers crossed…
Dear Jeremy
Very well said.
Stock based compensation (SBC) is the most abused aspect of corporate finance today.
Its origins lie in sweat equity paid by boot-strapped start-ups, where a share in the business was given in lieu of cash remuneration due to cash flow constraints.
However, today, SBC has morphed into something quite different. It is paid in addition to very generous cash salaries and is tantamount to a transfer of wealth from shareholders to insiders.
Contrary to the excuses given for making SBC awards, it does not align interests with investors – in fact quite the opposite is true. More particularly, stock repurchases to offset dilution erode shareholder equity and distort the market.
Meanwhile, the regulator seems to have been asleep at the wheel.
We have just released a podcast to reveal the extent of SBC abuse in the market: https://rockandturner.substack.com/p/podcast-serious-bleed-on-capital
Please share this because many investors are unaware of the issue and unless shareholder make a stand, nothing will change.
Best regards
James
thank you for the lind words, i will check out that podcast!!
the FT is picking up the story:
https://www.ft.com/content/48f9fcfc-f687-4e9b-8540-c63b3821c609
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