A Mysterious Force Took Over Investing. I Know What It Is. (value vs growth, ML)

[RuleNumberOne]

Why don't activists move companies away from all-cash to all-stock compensation for their employees?

 

That way the non-GAAP profits would shoot up. If this is done gradually, it might even come across as "expanding operating margins".

[Liberty]

Why don't activists move companies away from all-cash to all-stock compensation for their employees?

 

That way the non-GAAP profits would shoot up. If this is done gradually, it might even come across as "expanding operating margins".

 

Because employees need cash to live, probably don't want to take quite that much risk, and during early stages, that stock is highly iliquid.

[RuleNumberOne]

Public company stock is not illiquid. In fact, in the Bay Area, mortgage lenders count stock compensation as equivalent to cash compensation when determining how much can be lent within regulatory limits. No difference between cash and RSUs as far as lenders as concerned.

 

Pre-IPO stock is illiquid. But we are talking about public companies. When a public company hires an engineer, at least one-third of the starting compensation is in RSUs, sometimes half (true for all the companies people in CoBF invest in). People rely on selling their stock compensation to meet expenses.

 

I think as this bull market goes on, more cash compensation will shift to stock. Otherwise any given company will find it hard to compete as its competitors shift to stock, report high non-GAAP EPS, higher stock prices, attract candidates to their companies. Only-cash companies will lose employees to non-GAAP companies.

 

 

Why don't activists move companies away from all-cash to all-stock compensation for their employees?

 

That way the non-GAAP profits would shoot up. If this is done gradually, it might even come across as "expanding operating margins".

 

Because employees need cash to live, probably don't want to take quite that much risk, and during early stages, that stock is highly iliquid.

[Liberty]

Public company stock is not illiquid. In fact, in the Bay Area, mortgage lenders count stock compensation as equivalent to cash compensation when determining how much can be lent within regulatory limits. No difference between cash and RSUs as far as lenders as concerned.

 

Pre-IPO stock is illiquid. But we are talking about public companies. When a public company hires an engineer, at least one-third of the starting compensation is in RSUs, sometimes half (true for all the companies people in CoBF invest in). People rely on selling their stock compensation to meet expenses.

 

I think as this bull market goes on, more cash compensation will shift to stock. Otherwise any given company will find it hard to compete as its competitors shift to stock, report high non-GAAP EPS, higher stock prices, attract candidates to their companies. Only-cash companies will lose employees to non-GAAP companies.

 

Maybe I wasn't clear, but when I said "early stage", I meant startup/pre-IPO, which is when it can be hardest to attract top-level employees and when going fill SBC might seem like it makes most sense.

 

SBC is reported. Anyone half-sophisticated looks at it and takes it into account. It's not free money or free margins or free higher-multiples..

[meiroy]

The bizarre thing is the low interest rates that have inflated market caps of unprofitable tech companies have also made huge amounts of venture capital available to startups that compete with those same unprofitable tech companies.

 

For example, I think Gusto ($200 million Series D) is a better product than Workday. I can also think of at least one startup that targets ServiceNow ($75 million Series B). Such startups are able to raise large amounts of venture capital.

 

How come there's no thread for Workday, also known as "Microsoft for poor people because MSFT is not even at 52w low".