Robinhood Markets Inc. is giving its founders four more years to hit share price targets that trigger stock awards worth $1.4 billion, according to a regulatory filing and four executive compensation experts who spoke to Reuters.
The executive compensation experts who analyzed the filing told Reuters in interviews that Robinhood Market Inc. will award Vladimir Tenev; the company’s CEO and Baiju Bhatt; the company’s Chief Creative Officer with 13.8 million shares based on its share price reaching certain price levels at the time of its Initial Public Offering (IPO).
The California-based financial services company, in a filling, revealed that it had witnessed massive growth and now has 18 million retail clients and customer assets worth $80 billion.
The executive compensation experts who analysed the filing also mentioned that the company adjusted the terms of the stock awards in May. This way, the founders get a second chance to receive the shares if the IPO price does not meet the thresholds under the plan. Robinhood Market Inc. says it made this adjustment to “maintain the incentives” of the stock award program.
This change would cost the company nothing less than $560 million in accounting expenses overtime, one of the compensation experts said.
The filing made by the company shows that if the original plan was to be followed, Robinhood stock would have to be priced at a minimum of $30.45 per share in the IPO for Vladimir Tenev and Baiju Bhatt to receive some stock. It would have to be priced at $101.50 per share for each of them to receive the entire stock award worth $1.4 billion.
This development has been received with scepticism by some people. Sarah Anderson, a program director at the Institute for Policy Studies whose research focuses on executive pay and inequality, mentioned that the company’s Initial Public Offering (IPO) would only be increasing the already fat pockets of the company’s founders – Vladimir Tenev and Baiju Bhatt, and that adjusting the stock award terms to reward the founders, who already own huge stakes of the company, was questionable. “Once you are already a billionaire, how much more of an incentive is this going to be for you to do a good job…”, she said. The company is yet to mention its targeted IPO price range.
Another school of thought opined that the adjusted stock award program may be a better way for the company to maximize its founders for the benefit of its shareholders irrespective of accounting costs. Eric Hoffmann, a Vice President at compensation consultant Farient Advisors LLC showed support for the adjusted stock award program. Talking about how the modified stock award program could push the company’s founders to keep the company private until they could hit the share price targets or push for an unsustainable valuation in the stock market debut, he said that “This does incentivize them over a longer period of time to drive up the stock price and increase shareholder value. A lot of people would argue that’s a good thing,” Hoffmann said.
A Robinhood spokesperson declined to make comments or make the company’s founders available for interviews.