Stock-based Compensation: A Double-Edged Sword

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Stock-based compensation has evolved from a less common practice to a prevalent method for incentivizing employees, particularly in lieu of cash salaries. The rising percentage of stock-based compensation compared to company sales significantly affects key financial metrics like earnings per share. Notably, the software and internet sectors are experiencing a reversion to pre-COVID levels of dilution. However, during the market turbulence in 2021 and 2022, excessive stock issuance without corresponding buybacks negatively impacted these companies' market performance. As a result, there is increasing scrutiny over such compensation practices, especially among larger tech firms, as the market prioritizes profitability over unbridled stock issuance.

On this TCAF Tuesday, hear Josh Brown and Michael Batnick discuss taking down risk, tech dilution, Apple reactions, and more on an all-new episode of What Are Your Thoughts!

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